FTSE boards failing ethnic minorities
A new Parker Review report published today by Sir John Parker, EY and the Department of Business, Energy & Industrial Strategy (BEIS), shows that 37% of FTSE 100 companies surveyed* (31 out of 83 companies) - do not have any ethnic minority representation on their boards.
The 2020 report provides an update from the Parker Review Committee, chaired by Sir John, which was commissioned to consult on the ethnic diversity of UK boards. In its first report, published in 2017, the Review made a series of recommendations and set a target for all FTSE 100 boards to have at least one director from an ethnic minority background by 2021 - ‘One by 2021’.
However, according to today’s Parker Review report – which, due to GDPR restrictions since the first report is based on voluntary data submissions – the pace of progress has been slower than hoped. Indeed, it concludes that it will be challenging for FTSE 100 companies to hit the ‘One by 2021’ target recommended by the Review in 2017.
In 2017, over 50% of FTSE 100 boards (51 out of 100 companies analysed) had no ethnic representation on their boards. This compares to 37% of FTSE 100 boards in 2020 (31 out of 83 companies surveyed). The latest data reveals that, since the 2017 Review, 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.”
15 Chair/CEO positions in FTSE 350 held by an ethnic minority
In addition, the 2020 Parker Review provides first time analysis of FTSE 250 boards which were found to be even less diverse than the FTSE 100. 69% of the FTSE 250 companies analysed (119 out of 173 companies) have no ethnic diversity on their boards**. Across the FTSE 350, 59% have no ethnic representation on their company boards (150 out of 256 companies analysed).
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
To help accelerate the rate of progress, the 2020 Parker Review report sets out additional recommendations, whilst maintaining those set out in the 2017 report. The new recommendations focus on measuring board level diversity and helping to build a pipeline of board-ready candidates.
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.
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 with the aim of delivering the recommendations in the Parker Review and should cover board appointment processes and the work of the nomination committee.
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 to this initiative to cover ethnic diversity.
Develop - A pool of high potential, ethnic minority leaders and senior managers should be developed as part of a cross-sector sponsorship/mentoring programme. These individuals should be sponsored by CEOs across the FTSE 350 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.”
The full report can be downloaded here: 2020 Parker Review report.
About the Parker Review
This iteration of the Parker Review was conducted through survey research of all FTSE 350 companies. Data presented is therefore self-reported by companies. As a result of GDPR restrictions, we have changed the mode of obtaining data from the previous method which involved imputing ethnicity classifications from open sources. In addition, we have expanded the coverage beyond FTSE 100 companies, to include the FTSE 250.
Data on companies' directors was obtained through an online survey of FTSE 350 firms. Data was collected between July 2019 to January 2020. If a company made a change to their board after completing the survey, that change will not necessarily be reflected in the report unless the company made the Parker Review Committee aware. The committee welcomes any responses from companies who identify as meeting the target after the release of the report but note that this highlights the challenges of collating data with regards to ethnic diversity on boards.
* 2020 Parker Review survey: 96 (96%) of the FTSE 100 responded
- 52 companies have met the target of having at least one ethnic minority director on their board by 2021
- 31 companies have not met the target of having at least one ethnic minority director on their board by 2021
- 13 companies are unknown as they did not provide enough information
- Four companies did not respond
** 203 (81%) of the FTSE 250 responded to the 2020 Parker Review survey
- 54 companies have at least one ethnic minority director on their board
- 119 companies do not have at least one ethnic minority director on their board
- 30 companies are unknown as they did not provide enough information
- 47 companies did not respond
2017 Parker Review report: based on analysis of publicly available information on all companies in the FTSE 100
- 51 companies in the FTSE 100 did not have any ethnic minority directors on their board
[Please note the FTSE 250 breakdown has been conducted for the first time this year. Comparable stats are not available for 2017]
The composition of the Review Steering Committee assembled by Sir John Parker is set out in the Report. All members gave their time and contributions on a voluntary basis. The Committee’s work was supported organisationally by EY, and by Linklaters in the drafting of the Report.
