Less than a year since its launch in November 2016, the Parker Review Committee’s “A report into the Ethnic Diversity of UK Boards” has been published following a consultation process.
The report contains the committee’s final musings on ethnic diversity on UK boards, specifically those listed on the FTSE 100 and 250. Though the review acknowledges the “overwhelmingly positive” feedback from stakeholders during the open consultation period, its initial recommendations remain unchanged. Commenting on the review, Sir John Parker opines that “[t]oday’s FTSE 100 and 250 Boards do not reflect the society we live in, nor do they reflect the international markets in which they operate. Whilst we are making good progress on gender diversity in the Boardroom, we still have much to do when it comes to ethnic and cultural diversity … These recommendations received overwhelmingly positive feedback and we have now provided some practical tools to help Boards implement them”.
The report specifically references the McGregor-Smith review on race in the workplace and states that “several of the findings set out in that report are fundamental building blocks for making the recommended and necessary changes in Boardrooms across the UK, including an intensive examination of recruitment, talent development and the creation of opportunities for an increasingly diverse workforce. In particular, the emphasis on developing people from the outset to build a strong pipeline of potential candidates for management and Board directorships is at the core of our recommendations”. Further, the report intimates support for the creation of a Business Inclusion and Diversity Group to be chaired by Margot James MP and to be comprised of, amongst others, Sir John, Baroness McGregor-Smith and Sir Phillip Hampton.
The government-backed review, as part of its remit, examined the composition of the boards of FTSE 100 firms and made the following observations:
Of the 1050 total director positions:
- UK citizens of colour represent only about 2% of total;
- There are 85 individual directors of colour, four of whom hold more than one position;
- The total number of directors of colour represents about 8% of total (vs. 14% of the UK population); and
- Only six people of colour hold the position of chair or CEO.
Of the firms examined:
- 51 do not have any directors of colour serving on their board;
- 7 companies account for over 40% of the 85 directors of colour; and
- Of those 7 companies, 5 have headquarters historically located outside the UK.
Consequently, the report recommendations are threefold:
- increase the ethnic diversity of UK boards;
- develop candidates for the pipeline and plan for succession; and
- enhance transparency and disclosure.
Within these broad categories, the review more specifically recommends that FTSE 100 boards should have at least one director of colour by 2021 and by 2024 for FTSE 250 companies, that board chairs and existing directors should identify, mentor and/or sponsor people of colour within their own organisation to ensure their readiness to assume senior roles and that companies should disclose its efforts to enhance ethnic diversity in their annual report. The recommendations are initially being posited on a “comply or explain” basis, in line with UK Code norms; however, the review is suggestive of a potentially stricter stance if there is “insufficient progress towards the goals” outlined above.
For its part, the committee has resolved to meet annually until the first milestone of 2021 and has intimated that it will continue to engage with stakeholders and the Institute of Directors “to ensure that progress is being made and that suitable candidates are being prepared to assume board roles in the future”.
Natasha is a manager covering the UK, Ireland, and Northern European markets.