The Parker Review – Progress in ethnic diversity on UK boards

The latest report from the Parker Review Committee was published on 13 March 2023. Following its inception in 2015, it set voluntary targets for the largest 350 public companies to have at least one ethnic minority director on the board by December 2021 (for FTSE 100 companies) or by December 2024 (for FTSE 250 companies).

Now, to kickstart progress beyond the notion of ‘one and done’, the Review has extended its expectations and targets for businesses. 

2023 results at a glance 

FTSE 100

Illustrative of the overwhelmingly positive engagement with the Review, all of the FTSE 100 voluntarily responded with sufficient data. As at December 2022, there were ethnic minority directors on 96 FTSE 100 boards (more than double the figure from 2016 and up from 89 last year). 49 of these companies exceeded the target by having more than one ethnic minority director on the board. 

Overall, 18% of FTSE 100 director positions are now held by directors from a minority ethnic group which is roughly in line with the 17% ethnic minority representation across the general UK population. 

FTSE 250

Less ethnic diversity was observed on FTSE 250 boards in comparison with the FTSE 100, albeit the number of companies with ethnic minority directors continues to grow. There were ethnic minority directors in 67% of the FTSE 250 companies which reported, amounting to 60% of all FTSE 250 boards. However, only 28 FTSE 250 companies had two or more minority ethnic directors. 

Encouragingly, the gender balance of ethnic minority directors in the FTSE 350 is almost equal with 48% being women.

Extension of targets

To encourage companies to move beyond the notion of ‘one and done’ and accelerate progress, this year’s report sets new objectives extending beyond board level and listed companies:

• Influenced by the FTSE Women Leaders Review’s decision to include the largest 50 private companies in scope, the Review will now ask these private companies to provide data about their ethnic diversity each year from December 2023. The aim is to increase progress on ethnic diversity across a larger proportion of UK business, aligning targets for private companies with those for listed companies.
• Private companies have been set the target of having at least one ethnic minority director on their main board by December 2027.
• Ethnic diversity at senior management level will now be under the spotlight too. Senior management is defined as the Executive Committee and the senior managers who report directly to them. However, unlike the specific targets set for gender representation by the FTSE Women Leaders Review (see our summary here), FTSE 350 companies and the 50 largest private companies will be able to set their own targets for what the percentage of senior management who identify as being from an ethnic minority will be in December 2027.
  
  The reasoning behind the voluntary target-setting approach stems from the significant regional variations in ethnic minority representation, meaning a ‘one-size-fits-all’ approach is not necessarily appropriate (unlike for gender where representation is regionally consistent). The Review compares the relatively ethnically diverse population of London where 54% identify as white with that of the North East, where the figure is 93%.
  
  There is no recommendation as to what targets should be set, although as a starting point, the Review suggests companies consider census data on ethnic diversity in their region, and the current ethnic diversity of senior management, the talent pipeline, and the sector. Companies should report progress against these targets annually.

Reflections on ethnicity data

Historically, many firms have focused almost exclusively on improving gender representation because of the existence of external targets and expectations. However, ethnicity diversity is increasingly receiving more attention including by the regulator. Last year’s update to the Listing Rules now requires public companies to disclose against targets on the representation of ethnic minorities on their boards and executive management (see our summary here). Many public and private companies now also choose to voluntarily report on their ethnicity pay gap despite any legal requirement to do so.

Nonetheless, collecting employee ethnicity data remains a challenge for many employers. One of the key takeaways for companies is to encourage as many employees as possible to self-declare their ethnicity to enable meaningful engagement with the Review’s objectives.