Britain’s largest companies are failing to appoint members from ethnic minority groups, according to the latest iteration of the Parker Review.
This year’s report, compiled by Sir John Parker, reveals that 37% of FTSE 100 companies surveyed (31 from 83) have no ethnic minority representation on their boards, down from 51% in 2017.
In the first report from the Parker Committee in 2017, boards were challenged to have “one by 2021”—a single member in the boardroom from an ethnic minority.
This week Sir John said “action is needed” to bring about long-term change to board composition and called on boards to lend ethnic representation as much importance as they have done the issue of gender diversity. He pressed boards to ensure recruitment policies were in tune with the demographics of the UK.
“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,” said Sir John.
“Ethnic diversity needs to be given the same level of boardroom 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.”
In his report Sir John said too many companies remain “complacent”.
“To many, our continuing lack of ethnic diversity looks less like a failure on the part of minority communities to produce competent candidates, and far more like a choice on the part of business to settle for the familiar and traditional recruitment processes.”
He took aim at company chairs, and the chairs of nominations committees, calling on them to be more “assertive”, “not least by refusing to accept the head-hunter’s excuse that ‘the candidates just aren’t there’.”
Sir John said when he heard this message, his next step was to “find better consultants”.
The report found that 150 of the 256 FTSE 350 companies surveyed so far fail to include one director from a minority group on their boards. Currently, 6.8% of directors in the FTSE 350 are minority representative. That amounts to 98 out of 868 in the FTSE 100. For the FTSE 250, the figure is 80 out of 1,503. Only 15 chairs and chief executives in the FTSE 350 are directors of colour.
Arun Batra, a partner at EY and an adviser to the Parker Review, said: “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.”
The Parker Review makes a number of recommendations for accelerating the pace of change.
The report asks companies to increase their engagement with the issue. A few companies failed to respond to requests for data from researchers.
Companies should also report fully on their diversity policies and progress against the Parker Review recommendations. Recruiters should be more active in “marketing” candidates from ethnic minorities, and companies should develop a pool of talent among senior managers to be mentored by highly placed executives, including CEOs.
In separate research, the Financial Reporting Council (FRC), the UK’s governance regulator, found that board diversity policies were a problem for many companies. It found 52% of the FTSE 250 fail to mention ethnicity in their diversity policies, while “most” of the FTSE 350 fail to set “measurable” ethnicity targets for their boards.
Just 14% of the FTSE 100 set targets. The FRC reported that no FTSE 350 companies report their progress against targets, even when they declare them.
The FRC’s chief executive, Sir Jon Thompson, said: “The UK’s record on boardroom ethnicity is poor.
“It is unacceptable that talented people are being excluded from succession and leadership simply because companies are failing to put in place appropriate policies on boardroom ethnicity, are not setting targets or are not monitoring their progress against policies.”