Are Multicultural Talents Adequately Represented & Encouraged at Board Level in FTSE 100 UK Companies?
As the UK population and general workforce becomes more diverse, how is this reflected in FTSE 100 companies? Do board level positions have a higher number of BAME employees in 2020 than in the past and, if not, why isn’t there more diversity at the top?
How Companies Compare To The UK Population
According to the Diversity Q FTSE 100 Board Diversity Report 2020, white males currently make up 62% of board positions and occupy 83.8% of executive directorships in the UK. White females make up 28% of board positions, whilst BAME men make up 6% and BAME women only 3.8%.
The report also found that there are only 99 BAME people in senior positions, which is made up of 19 executive directorships and 80 non-executive directorships. There are seven CEOs from an Asian or minority backgrounds, but no black CEOs. The 2020 New Parker report found that, of the companies that were surveyed, 37% of FTSE 100 companies did not have any BAME representation at all on their boards.
These statistics are at odds with the numbers of BAME people in the general UK population. Data shows that, in 2018, 13.8% of people in Britain were from a BAME background. Additionally, over half of FTSE 100 countries are based in London – the capital is Britain’s most diverse region, where over 40% of the population is from a non-white background.
Furthermore, The UK’s adult population and workforce is set to become far more diverse in the coming years, as 25% of children that are primary school age in Britain are from a BAME background. This could soon make the current disparities at the very top of major companies even more out of step with the general population.
Meeting Government Targets
In 2017, the independent report Parker Review recommended that every FTSE 100 company should have at least one director of colour by 2021. When the recommendation was first made, over 50% of FTSE 100 boards had no BAME representation on their boards. Although this number had improved by 2020 with 11 FTSE 100 members being added, 31 companies still have no minority representation, while the remaining companies failed to disclose information regarding board diversity.
With just one year left to go before the deadline, critics say that the original target is unlikely to be achieved. While serving as the UK government’s Business Secretary, Andrea Leadsom expressed her disappointment at the lack of progress seen in FTSE 100 companies. “There are some really commendable company initiatives on improving ethic minority representation and supporting a diverse talent pipeline. However, we are now less than two years off the first of these target dates and it is clear that not enough is being done by the FTSE 100 as a whole to deliver.”
What Companies Can Do
The Financial Reporting Council’s Chief Executive, Sir Jon Thompson, identified a lack of awareness and accountability that companies need to address. “It is unacceptable that talented people are being excluded from successions 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,” he said in an interview.
The Parker Review also set out specific recommendations. It said that FTSE 100 companies should engage with reviews and initiatives seeking to improve diversity and create in-depth reports of the steps they’re taking to be more inclusive. It also advised marketing directly to BAME candidates and developing BAME employees so that they are prepared to take on leadership roles.
In the short-term, companies should seek to make it a priority to appoint at least one BAME board member. Legal & General, the UK’s biggest fund manager, recently wrote to FTSE 100 companies with all-white boards saying that it will vote against those that don’t diversify their teams by 2022. They’ve asked for boardrooms to include at least one BAME member by January 2022 and have warned that they would openly vote against the re-election of their Chairman or Head of their Nomination Committee if companies fail to meet that target.
Missing Out On BAME Talent
The Parker Review also warned that companies could be missing out on multicultural talent. Their report stated that, “one common refrain that we have heard when discussing the prospect of increasing the representation of people of colour in senior leadership positions… is that there are not enough candidates capable and qualified candidates,” it said. Yet, “…Since 2016, there have been several reports published (one by Green Park and the other by Audeliss in conjunction with the Financial Times) that highlighted hundreds of high calibre “board-ready” candidates who were from minority ethnic backgrounds.”
The former Equalities Commission head, Trevor Phillips, has warned that UK companies could face, “commercial risk, regulatory attention and losing key talent to global competitors.” Meanwhile, a study from McKinsey found that companies with culturally and ethnically diverse executive teams were 33% more likely to see better-than-average profits.
This demonstrates how underrepresentation of multicultural talents at board level isn’t simply a moral argument. If things don’t improve, FTSE 100 companies could be given a significant financial disadvantage by having an all-white boardroom.