Businesses must proactively confront how they treat ethnic minorities

James Frayne
Boardrooms are not representative of the general population (Source: Getty)

Theresa May has not defined herself as a great defender of the rights of minorities, but in practice she has been taking an active interest in the issue.

As home secretary, she reformed stop and search policies because of concerns about their negative impact on minorities. Now she has announced a new audit of how minorities are treated by the public sector.

This audit will publish its first data before the summer of 2017. But a logical next step must surely be to extend this auditing into how minorities are treated within the private sector. How would such a private sector audit be constructed and what would it show?

As with the public sector audit, we should assume a private sector audit would be produced rapidly. Governments work fast because of external pressure to be seen to act and because of the need to keep the machine focused. Consequently, reports tend to use quantitative and qualitative data that is immediately available or readily attainable.

Following the public sector model, a private sector audit would likely focus on top line statistics such as the employment and unemployment rates of minorities compared to white workers; numbers of minorities at chief executive and board level; comparative pay rates and differentials between ethnic groups; graduate recruitment breakdowns; hiring and firing figures; and whether certain sectors have particularly low representations of minorities.

Qualitative research might look at stated recruitment practices and real world outcomes; how job ads are written and where they appear; and how graduate recruitment schemes operate. They might also look at the stated and “real” internal cultures of major businesses; the nature of the interaction between businesses and recruitment firms; the way recruitment firms go about their searches; and how promotion panels operate.

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How would the private sector fare on such measures? On the face of it, overall, perhaps not well. Some businesses and some sectors have significant numbers of minorities represented through their ranks. However, the Equality and Human Rights Commission’s (EHRC) recent report on ethnic minorities in Britain showed that, for example, minorities had much higher unemployment rates than white people. Black men had seen sharp falls in full-time employment recently, and Pakistani and Bangladeshi women were much less likely to be in employment than the average.

The EHRC pointed out in its report that, at the end of 2014, all-white executive teams ran 69 per cent of FTSE 100 companies and that 95 per cent of FTSE 100 board directors were white. It also found that only 8.8 per cent of ethnic minorities work as “Managers, Directors and Senior Officials” compared to 10.7 per cent of white people (although it did not draw a distinction here between the public and private sectors).

No government to date has gone so far as to set aspirational targets for ethnic minorities on boards or in senior management positions – let alone firm targets – but it is clearly not hard to see how pressure might emerge for such moves following a high-profile audit. It is also not hard to see how pressure might emerge for much greater transparency of hiring practices (and of the work of recruitment firms), and other similar measures.

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Most businesses would welcome the sentiment behind such an audit. They take their responsibilities to society seriously, despite their fundamental need to create profit. That said, while they will have views on what they would welcome, they will also know what they would consider to be unfair or misdirected. Many will be thinking about how they will be able to navigate what is an unbelievably sensitive subject.

With this in mind, businesses should be thinking about two big things. First, they should think about their own audits – how are they doing on likely performance measures and why? They need to ensure that the government has all the information it needs to make the right recommendations. Second, they should create their own set of recommendations for action. While this should focus on business, it must also focus on what the government can do to make it easier for them to better recruit, retain and promote minorities.

Most businesses tend to be reactive in the field of public policy and pre-emptive action rarely happens. On this issue, there is a moral imperative for action now to deal with what is clearly an important issue, but there is an operational imperative too. Given the possibility of a private sector audit, they would be wrong not to consider this a priority.

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