Ethnic diversity on boards: Progress or stagnation?

Chris Hodge FCG, Policy Advisor at The Chartered Governance Institute UK & Ireland, comments on the Parker Review Steering Committee's 'two years on' progress report on ethnic diversity on UK boards.  

Yesterday the Parker Review Steering Committee published its ‘two years on’ progress report. It might more accurately be described as a lack of progress report.

Sir John Parker’s original report on the ethnic diversity of UK boards, published in late 2017, recommended that all FTSE100 companies should have at least one person of colour on their boards by 2021 – a target that it called ‘One by 21’.

At the time the report was published, just over half of the FTSE100 already met the target. Two years on, that number has only risen to two-thirds. The number of directors of colour in the FTSE 100 has increased from 85 to 98 since the first report was published, and they now account for 2.3% of all directors compared to 2% in 2017.

There really is no way of dressing up the recruitment of just 13 individuals in two years as good news.

Some allowance perhaps needs to be made for the typically slow turnover rates at board level, but that argument can be overstated. It did not prevent the percentage of female directors in the FTSE100 increasing by nearly 5% in the first two years following the 2011 Davies report on women on boards, for example.

It has been an uphill struggle to convince some companies that women deserve a place in the boardroom on merit, but that is beginning to look like a walk in the park by comparison.

It is also notable that across the FTSE350 just one-third of directors of colour are UK citizens. With many multinationals and non-domicile companies listed in London, a significant number of foreign nationals is to be expected – and welcomed. But can 350 companies really only find 57 suitably qualified individuals from the UK between them?

It appears that companies are better able, or more willing, to identify talent from abroad than they are talent at home. Which begs the question, how hard are they looking? And where?

It certainly doesn’t seem to be within their own organisations. According to the new report, only 10% of FTSE100 companies have initiatives for increasing ethnic diversity at senior management levels.

It is hard to disagree with Sir John’s observation that “our continuing lack of ethnic diversity looks less like a failure on the part of minority communities to produce competent candidates, and far more like a choice on the part of business to settle for the familiar and traditional recruitment processes”.

In 2016, The Chartered Governance Institute issued a report with EY on the developing role of the nomination committee in talent development and succession planning. Two of the main messages in that report were that boards and committees needed to look deeper into the company to identify and develop its future leaders and to cast the net more widely when identifying potential directors, looking beyond the usual suspects.

Those messages appear even more relevant now than they did then. On the evidence of this report, there seems to be a real and urgent need for companies to step up their efforts. As Sir John says, this issue is not just about doing the right thing by individuals or communities, but doing the right thing for the company as well. Nobody gains if a significant part of the talent pool is neglected or not nurtured.

The author of this blog is Chris Hodge FCG, Policy Advisor at The Chartered Governance Institute

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