If perception is everything then the appearance of UK board photos reveals a problematic story about the ethnic diversity among execs and non-execs.
In a departure from the usual kind of survey, Piranha Photography, an agency familiar with taking corporate snaps, looked at boardroom photos to find that 56% of the UK’s 100 biggest companies appear to have no directors from a black or ethnic minority (BAME) background.
Those that appear to have no BAME directors include insurance group Admiral, utility group Severn Trent, the online food delivery service, Ocado, and travel and leisure group TUI, as well as fashion retailer Burberry.
Of those companies that do have BAME representation in the boardroom, 33 have just a single director.
The research appears to show that while the role of women in the boardroom has made much progress, BAME inclusion is lagging.
Piranha is not the only organisation to draw attention to the subject. When Green Park, a specialist recruitment consultancy, researched the issue it found that 58% of FTSE 100 constituents were without a BAME member on their boards. And when, in July last year, the Parker Review looked at ethnic minority members of the top 100 companies, it found that just 85 out of 1,050 directors were people from ethnic minorities. That’s around 8%.
Led by Sir John Parker, a former chairman of Anglo American and currently the lead non-executive on the Cabinet Office board, the review recommended that every FTSE 100 company should have a BAME member by 2021, and the FTSE 250 by 2024. Reviewing progress so far, that’s looking like an uphill struggle.
The progress concerns many. According to Suki Sandhu, chief executive of INvolve and Audeliss, executive search agencies, “you can’t be what you can’t see.”
Sandhu says that boardroom progress is not fast enough. “While boardrooms remain white, and when organisations aren’t creating inclusive policies for the conscious inclusion of ethnic minority talent, we will continue to see progress move at a glacial pace.”
And if you were in any doubt about the importance of the issue, a 2015 report from McKinsey has become the standard citation. The report says companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns “above their respective industry medians.”
At the time of their report Green Park lamented a lack of government action on the issue. Indeed, when a new UK Corporate Governance Code was published earlier this year, the consultancy found little to encourage more ethnic diversity. In an article for the website Executive Grapevine, Raj Tulsiani, chief executive of Green Park, noted that the Financial Reporting Council, the UK’s corporate governance watchdog and author of the code, maintained a board that was all white. “How can you expect the FRC to influence diversity in other firms when they cannot even achieve it in theirs?” he said.
There is cause for optimism. Piranha noted that though BAME representatives were missing from boardrooms, they did appear to be appropriately represented elsewhere.
“More positively, at the operational level, the annual reports of FTSE 100 companies do carry plenty of images of people from BAME backgrounds, which is an accurate representation of their management, staff and customers in modern Britain,” according to Douglas Fry, managing director of Piranha. So, perhaps it is a pipeline issue?
This, at least, is where some progress is being made. Green Park also applied a microscope to pipeline prospects and found that it improved 5% for people from an ethnic minority background last year.
Suki Sandhu says the Parker Review’s emphasis on talent development through succession planning, mentoring, sponsoring and transparent reporting of progress are key elements. “These are all steps in the right direction,” he says.
He adds that companies can take the further measure of ensuring that they never work with all-white, all-male shortlists, “as this is a sure-fire way to diversify the boardroom.”
There is an added urgency to the issue. Departure from the European Union will leave the UK looking for other trading partners, placing a premium on the right representatives at board level. Indeed, Green Park advised UK boards to recruit more members of East Asian and African backgrounds.
The good news is that some companies have openly declared their intentions. Lloyds Banking Group announced in February that it was aiming for ethnic monority candidates to fill 8% of senior management roles by 2020. RBS said it would double the number of ethnic minority people in leadership roles by 2025.
But why has representation been slow to improve? The Parker Review recommendations were fairly recent and employment policies take time to turn around and for results to appear.
The “white” nature of current boardrooms could be an obstacle. People tend to hire others like themselves. There is also a cultural issue. Business finds discussion about race uncomfortable. Sandhu says few people want to confront the “racial bias” they might harbour. “The language is always evolving so it’s a challenge to know what can and can’t be said on the subject of race,” he adds.
There are those, however, who believe more disclosure is the answer and explicit responsibility should be given to nominations committees in the UK Corporate Governance Code.
The code currently says annual reports should include a section on the work of nominations committees and how they build a diverse pipeline and how they have “influenced” board composition. The annual report should also describe: “ …the policy on diversity and inclusion, its objectives and linkage to company strategy, how it has been implemented and progress on achieving the objectives…”
However, while the code asks for annual reports to describe the “gender balance” in senior management, it fails to make any explicit reference to ethnic minorities. Many will see that as leaving plenty of room for improvement.