A review of progress on the ethnic diversity of UK Boards has again urged more action from businesses. The annual update on the Parker Review has included a call from Sir John Parker for companies to step up their work on ethnic and cultural diversity at the top of their organisations.
The Parker Review Committee has published its first annual update to track the progress made against the recommendations in its Final Report, published in October 2017. The Final Report urged business leaders to improve the ethnic and cultural diversity of UK Boards to better reflect their employee base and the communities they serve. It set out achievable objectives and timescales to encourage greater diversity. The recommendations fall under the following three areas:
- Increase the ethnic diversity of UK Boards by proposing each FTSE 100 Board to have at least one director from an ethnic minority background by 2021 and for each FTSE 250 Board to do the same by 2024
- Develop a pipeline of candidates and plan for succession through mentoring and sponsoring
- Enhance transparency and disclosure to record and track progress against the objectives
This annual update demonstrates that there is much to do to meet these objectives. As at the end of August 2018:
- Only 84 of the 1,048 director positions in the FTSE 100 are held by people from ethnic minorities, compared to 85 last year
- It remains the case that only two% of director positions are held by people from ethnic minorities who are UK citizens, despite this group making up 14% of the total UK population (up from two% in 1971)
- 54 companies of the FTSE 100 do not have any ethnic minorities on their Boards, up on 51 last year
- The number of Chair / CEOs from ethnic minorities in the FTSE 100 increased to 9 from 6 last year, although this is the same level as 2016.
There has, however, been notable progress in enhancing transparency and disclosure this year:
- The government amended the Data Protection Act to help businesses ensure diversity in their boardroom and senior management. As recommended by The Parker Review, these amendments allow organisations such as executive search agencies to process personal data about candidates’ ethnic origin when identifying suitable candidates for potential managerial positions, providing safeguards are in place to protect their privacy. The Parker Review Committee are working with executive search agencies to promote the use of diverse job shortlists
- FTSE 350 companies have recognised the Parker Review in their disclosure. Nearly 10% of these companies made some reference to the Review in their board diversity policy and almost one third of these companies now refer to ethnic diversity within their board’s diversity policy, up from only 10 companies in the FTSE 100 and 23 in the FTSE 250 in 2016
- The Financial Reporting Council’s update of the UK Corporate Governance Code in July 2018 emphasised the importance of diversity. It encouraged boards to ensure appointment and succession planning practices are designed to promote diversity as well as to report on actions taken to promote diversity. It also broadened the focus of the nomination committee to oversee the development of a diverse pipeline for succession to senior management
“This update shows that we still have much to do when it comes to ethnic and cultural diversity in the boardroom. FTSE 100 and 250 Boards need to do more to reflect the society we live in and the international markets in which they operate,” said Sir John Parker. “We are, however, pleased with progress in enhancing transparency and disclosure this year. It is clear that companies are increasingly aware of changing expectations and business imperatives around the need for a more inclusive society. We urge them, therefore, to translate the growing understanding of the importance of this issue into real change in the Boardroom in the coming years.”
The Steering Committee will continue to track the progress made against the recommendations on an annual basis.