Thursday 6 February 2020 4:30 am

FTSE boards must turn intent into action when it comes to ethnic diversity

Sir John Parker is the chairman of the Parker Review Committee
Arun Batra
Arun Batra is a partner at EY and adviser to the Parker Review

“One by 21” was a target that seemed realistic in 2017. However, three years on and it is less clear whether the ambition of having one ethnic minority director on each FTSE 100 board by next year is achievable.

It is impossible to deny that there has been movement in the last few years. Since 2017, 11 more FTSE 100 firms have an ethnic minority director on their board, and there have been strong signals of intent from those that engaged with the 2020 Parker Review, published yesterday. 

Read more: Employment bodies hit out at FTSE boards over lack of diversity

But ultimately progress has been slower than hoped for, and there is still some way to go.

The need and case for change remains clear. A diverse board which reflects wider society will better understand the needs of its customer base and achieve better business performance. And greater diversity of experience and background leads to better discussion and challenge in a board. 

Yet more than 30 FTSE 100 boards still have no ethnic representation. 

Looking across the FTSE 350, the figures are even more stark; more than 150 boards have no ethnic diversity.

Around 14 per cent of the UK population is non-white, and this is expected to increase up to 20 per cent by 2030. This demographic change is taking place not just in the UK but across the world. Ethnic diversity needs to be given the same level of focus that led to increasing female representation on boards, which has seen real progress in recent years.

We know that this problem cannot be solved overnight. Changing mindsets within a business takes time. 

Organisations continue to underestimate the breadth and depth of the available talent pool both in the UK and globally, and the benefits they can get from that talent. 

Moreover many people continue to struggle with discussing race in the workplace, and subsequently misunderstand the potential of ethnic minority talent.

We know that the pipeline of future leaders is far from full, and that too few people within UK businesses are prepared to do something about it. Simply put, there is inertia.

Sign up to City A.M.’s Midday Update newsletter, delivered to your inbox every lunchtime

We need an approach which combines several parallel activities. Those include pressure from regulatory frameworks on reporting the makeup of boards and diversity policies; leadership buy-in with a commitment to investigate hidden talent in the business; and challenging legacy issues. Combined, these will be powerful in improving a company’s diversity.

Organisations need to make sure that any steps they take are not just temporary solutions, but set a precedent for the long term. 

They need to prioritise ethnic diversity to the same degree as any other commercial imperative, setting targets to hold themselves to account and disclosing diversity metrics and progress on a regular basis. 

There is also a key role for targeted programmes to help high-performers reach senior management and board level, and for leaders to make a real investment in the progression and development of black and minority ethnic talent through sponsorship.

The Parker Review sets out clear guidelines to help companies along their diversity journey, and shows the importance of head-hunters in highlighting ethnic minority candidates for chair and chief executive roles. 

Read more: AIM and FTSE Small Cap firms ‘falling behind’ on board diversity

The recommendations are not a radical or exhaustive list, but outline several key actions which can accelerate change. They are forward-thinking and will encourage companies to carefully consider their commitment to diversity.

If we are to have any hope of meeting our “one by 21” target, the remaining all-white FTSE boards need to transform intent into action. If they do that, they too will realise the benefits of a diverse board.

Sir John Parker is chairman of the Parker Review committee. Arun Batra is a partner at EY and adviser to the committee.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.