Ethnic diversity on UK boards
16 October 2017
Business leaders are being urged to improve the ethnic and cultural diversity of UK Boards, with the publication of the final report of the Parker Review Committee, led by Sir John Parker. The report into the ethnic diversity of UK Boards follows a separate review of the progression of minority ethnic groups in the labour market generally led by Baroness Ruby McGregor-Smith, which reported in February.
At present there are no government plans to legislate to force the pace of change. That could well change, however, with compulsory publication of ethnicity pay gaps being a real possibility in years to come.
The Parker Review
The Parker Review was commissioned by the then Business Secretary Sajid Javid in late 2015, with the Committee publishing its final report this week.
The report notes that only 85 of the 1,050 director positions in the FTSE 100 are held by ‘people of colour’ (as at July 2017), with only 2% of director positions being held by ‘people of colour’ who are UK citizens, despite 14% of the total UK population identifying themselves as a ‘person of colour’ or from a ‘non-white’ ethnic group. The report uses the broad term ‘people of colour’ to capture individuals with evident heritage from African, Asian, Middle Eastern and South American regions, although it acknowledges that it is not an ideal term that will find favour with everyone.
To address this lack of board-level ethnic diversity, the Report makes a number of recommendations, including that:
- Each FTSE 100 Board should have at least one director of colour by 2021 and each FTSE 250 Board should achieve that same target by 2024.
- Nomination committees of all FTSE 100 and FTSE 250 companies should require their human resources teams and/or search firms to identify and present qualified people of colour to be considered for Board appointment when vacancies occur.
- FTSE 100 and FTSE 250 companies should develop a pipeline of candidates and plan for succession, including through mentoring and sponsoring led from the top and by encouraging and supporting candidates to take on internal and external roles that provide opportunities to develop oversight, leadership and stewardship skills.
- Companies should describe the Board’s policy
on diversity in their annual report, explaining the efforts made to increase, amongst other things, ethnic diversity within its organisation, including at Board level. Companies that do not meet Board composition recommendations by the relevant date should also explain why that is the case.
The Review Committee plans to track the progress made against the recommendations on an annual basis.
The McGregor-Smith Review
The recommendations of the Parker Review are not as far-reaching as those made in the McGregor-Smith report earlier this year. To an extent that is unsurprising, as the Parker review’s remit was somewhat narrower, being focussed on board-level appointments rather than the workforce as a whole.
One of the recommendations made in the McGregor-Smith report was that the Government should legislate to require all listed companies and businesses employing more than 50 people to publish workforce data broken down by race and pay band. During campaigning for the general election, Theresa May suggested that the new gender pay reporting rules would be extended to cover ethnicity pay gaps. Since then, however, political priorities have changed and, in the Summer, Business Minister Margot James made it clear that the Government has no present plans to legislate.
Calls for mandatory reporting of pay gaps by ethnicity will no doubt continue and it would be no surprise to see legislation in this area in years to come. In the meantime some employers are already choosing to make this kind of information public. The more organisations that do so, the greater will be the pressure on others to follow suit, or risk a perceived lack of transparency being interpreted as lack of interest in or engagement with diversity issues.
Read the full reports here:
For more information please contact Naeema Choudry.