Big businesses are dragging their feet in obtaining ethnic diversity on their boards reveals a new Parker Review.

The report, published by Sir John Parker, EY and the Department of Business, Energy & Industrial Strategy (BEIS) shows that 37% of 83 FTSE 100 companies surveyed do not have any ethnic diversity representation at the highest level.

Over 50% of FTSE 100 companies (51 out of 100 analysed) had no ethnic representation on their boards when the first Parker Review of ethnic diversity on boards published in 2017.

It included a series of recommendations, as well as a target for all FTSE 100 boards to have at least one director from an ethnic minority background by 2021 – ‘One by 2021’.

Slow progress

The 2020 Review shows that the pace of progress has been slower than hoped, and concludes that it will be challenging for FTSE 100 companies to achieve ‘One by 2021’. Only 11 additional FTSE 100 companies now have an ethnic minority director on their board.

Sir John Parker, Chairman of the Parker Review Committee, said: “Although progress has been made to increase the representation of ethnic minorities on FTSE boards in the UK, there is still much more work to be done to reap the undeniable benefits that diverse leadership provides.

“Ethnic diversity needs to be given the same level of board room focus that finally led to increasing female representation on boards, which has seen real progress in recent years.

“To remain competitive in the global market, UK businesses must focus further on the recommendations in the report, increasing alignment of the board with its customer base at home and overseas. They must also address the key challenges of recruiting board talent now and in the future, recognising the significant demographic changes taking place in the UK and international markets in favour of ethnically diverse candidates. Action is needed to bring about long-term change.”

Delving deeper

15 Chair/CEO positions in FTSE 350 held by an ethnic minority

For the first time, the 2020 Parker Review also looked at FTSE 250 boards. These were found to be even less diverse with 69% of 173 companies analysed having no ethnic diversity on their boards. Across the FTSE 350, 59% of 256 companies surveyed, have no ethnic representation on their boards.

In total, 98 out of 868 directors who have disclosed their ethnicity in the FTSE 100 are from ethnic minority backgrounds, compared to 80 out of 1,503 directors who have disclosed their ethnicity in the FTSE 250. Looking at specific leadership roles across the companies surveyed for this year’s report, just six ethnic minority directors hold the position of Chair or CEO in the FTSE 100 and nine in the FTSE 250.

Of the ethnic minority directors in the FTSE 350 companies which engaged in the survey, 43% are women. This breaks down to 41% of BAME directors in the FTSE 100 and 45% of BAME directors in the FTSE 250 who are female.

Arun Batra, EY Partner, CEO of the National Equality Standard and adviser to the Parker Review added: “We recognise that meaningful change takes times, but the data tells us that the current pace of change is not quick enough to meet the targets set by the Review.

“Businesses need to continue to challenge traditional ways of working and legacy issues, and really investigate the talent that they have available in their business. While there isn’t a one size fits all approach, there are certainly a number of initiatives we’ve seen that make a difference in some companies. The recommendations in the review include setting diversity targets, disclosing diversity metrics and progress, and identifying targeted programmes and initiatives that can help high-performing BME individuals reach board level.”

Accelerating progress

Additional recommendations have been made in the 2020 Parker Review to help accelerate progress. They focus on measuring board-level diversity and helping to build a pipeline of board-ready candidates.

1. Engage – FTSE 350 companies must engage constructively on this issue and report on the ethnic diversity of their boards. The Review found that a small number of companies did not respond to their request for data.
2. Report – The Review urges companies to report fully on their ethnic diversity policies and activities as part of their reporting requirements and in compliance with the Corporate Governance Code. Ideally, this should also be to deliver the recommendations in the Parker Review and should cover board appointment processes and the work of the nomination committee.
3. Recruit – Executive recruiters should be much more proactive in ‘marketing’ highly talented ethnic minority candidates and in applying their voluntary code of conduct. Recruiters have already supported the Hampton-Alexander Review’s aim to increase female board representation. The Parker Review recommends an extension of this initiative to cover ethnic diversity.
4. Develop – A pool of high potential, ethnic minority leaders and senior managers should be developed as part of a cross-sector sponsorship/mentoring programme. CEOs across the FTSE 350 should sponsor these individuals through a well-structured and facilitated scheme.

The report also contains a detailed and broad-ranging toolkit for companies and those responsible for recruitment, to help implement many of the recommendations.

Rt Hon Andrea Leadsom MP, Secretary of State for Business, Energy & Industrial Strategy, said: “I want the UK to be the best place in the world to work and to grow a business. Research consistently shows that diversity in businesses is not only essential for good working practice but makes them more successful.

“This Government backs business and wants it to succeed in becoming more diverse. But as this report shows, firms have much more to do.”