This year’s Parker Review of ethnic diversity says the UK’s largest companies have made “remarkable progress”. But the report contains many reasons to resist declaring success just yet.
Released this week, the report reveals that at the end of last year 89 FTSE 100 companies had reached the “one-by-21” target of having at least one board member from an ethnic minority group. Three other companies say they are in the middle of recruiting a board member to meet the requirement.
Across the top 100 companies, 164 directors are now from ethnic minority groups, out of a total 1,056 positions—around 16%.
In comments for the report, Sir John Parker says: “Despite the range of disruptive impacts that the Covid-19 pandemic has had on companies, including boardroom recruitment, we have remarkable progress towards achieving our targets.”
He adds that “progressive and committed” leadership in boardrooms deserves “our congratulations and fulsome praise”.
Progress is also under way in the FTSE 250, where 55% of companies now have a director from an ethnic minority group. The FTSE 250 has more time to work on their boardroom recruitment plans, with Parker Review giving them until 2024.
And yet there are issues to be resolved—and some of them are big.
Firstly, the review acknowledges that most of the boardroom progress has been made by non-executives, not executive leaders. Only six chief executives and 12 other executive directors in the FTSE 100 have an ethnic minority background. Just three people holding chair positions are not white.
Only 6% of ethnic minority board members are British citizens. This is up on 1.5% in 2016, but perhaps still a sign that companies are having to look elsewhere for talent.
Consequently, the review stresses to boards that they “should not think of the Parker Review targets as one and done”.
Beyond the Parker Review target
Talent development is now the order of the day to ensure the profile of executive directors changes. The review politely suggests “it may be helpful” if companies review “talent management processes and other inclusion and diversity initiatives”.
It adds: “The activists inside the boardroom need to be complemented by programmes at all levels in the company to support the development of those from diverse backgrounds.
“It is this type of work that is key and which, we believe will create a culture in our companies that will help to release the potential of everyone working there.”
And development programmes appear to be the issue. Results of a study by Cranfield Business School, included in the review, says while the Black Lives Matter movement peaked concern about diversity inside boardrooms, indications are that only a proportion of companies have reponded emphatically.
A study of 25 FTSE 100 companies finds 15 had “targeted programmes” to tackle diversity. Of those only eight reported “race specific” schemes and only four disclosed projects to “racially diversify” leadership. Only one of the companies reported diversity as a non-financial performance metric even though 17 had diversity targets. Of those only ten were focused on ethnicity at senior levels.
Cranfield’s study even noted that the Parker Review’s voluntary target could be an issue because it may persuade companies to focus on the target instead of talent pipelines.
Others feel the issue needs government support including mandatory ethnicity pay gap reporting.
Meanwhile, many see the problem lying with companies failing to act on their publicly stated convictions. Lauren Sanderson, UK country manager for headhunting firm Russell Reynolds, says UK companies have for decades failed to offer the right opportunities for management talent from ethnic minorities.
“We have started to patch up the leaky pipeline of talent in the UK but unless businesses consistently provide the right experience to junior colleagues of colour, we will never achieve truly representative boardrooms,” she says.
“Diversifying the boardroom,” she adds, “means meeting talent on their terms and creating a role which fits their strengths. We must be creative and find a way to say yes.”
Sanderson’s views are echoed elsewhere. Suki Sandhu, CEO of specialist advisers Audeliss and Involve, says companies should recognise the “structural inequalities” that still block the progress of candidates from minority ethnic groups. Efforts to dismantle “barriers” and work on dedicated development schemes remains central to further progress. “Business still need to do the work to ensure a level playing field for their employees,” Sandhu says.
There is good news in the Parker Review. But counting the number of boardroom members from ethnic minorities currently in board positions offers a limited view. As we’ve seen with campaigns for gender diversity, executive roles and talent pipelines lag behind—and need specific attention.