October 13, 2017 Increasing ethnic diversity on boards
On 12 October 2017 the Parker review committee published its final report into ethnic and cultural diversity within the boards of UK companies. That a review was required is undisputed; the statistics are stark. When, responding to the demand for greater female representation, Lord Davies of Abersoch launched his women on board campaign in 2011, female representation stood at 12.5%. At the end of July 2017 ethnic representation on FTSE 100 boards stood at just over 8% with 51 of the FTSE 100 companies having no representation.
Given the initial success of Lord Abersoch’s campaign it’s hardly surprising therefore that Sir John Parker has adopted a similar approach, calling for each FTSE 100 Board to appoint at least one director from an ethnic minority background by 2021. FTSE 250 boards have been given a little more time, being asked to achieve the same target by 2024. Interestingly, the consultation which followed the original draft paper went further with stakeholders suggesting that the recommendations should apply to all companies as well as the third and public sectors.
However, targets aren’t going to achieve anything unless the leadership structure throughout organisations is better aligned. Leaders don’t suddenly appear fully formed; it takes time and experience to develop great leadership qualities. With this in mind the Parker review also recommends that companies take active steps to “Develop a pipeline of candidates and plan for succession through mentoring and sponsoring.” The report also calls for enhanced transparency and disclosure in order to track progress.
Commenting on the review its chairman, Sir John Parker, said “Today’s FTSE 100 and 250 Boards do not reflect the society we live in, nor do they reflect the international markets in which they operate. Whilst we are making good progress on gender diversity in the Boardroom, we still have much to do when it comes to ethnic and cultural diversity.”
Although the spotlight has moved on from gender to ethnic diversity we can’t afford to be complacent; at least if a survey from the USA is anything to go by. Admittedly the statistics represent US companies in which women account for 21% of C-suite positions. However, the survey found that in companies which had just 10% female leadership representation, nearly 50% of men thought that women were well represented and a third of women agreed. This suggests a perception gap which will need to be overcome in order to move diversity away from being a special exercise and into the mainstream.