Sir John Parker Review – FTSE Boards ‘do not reflect the ethnic diversity’
Each FTSE 100 Board should have at least one director of colour by 2021, and each FTSE 250 Board by 2024, according to report prepared by Sir John Parker and the Parker Review Committee, “Beyond One by ‘21”.
The Parker Review found that out of 1,087 director positions in the FTSE 100, only 8% of positions are held by directors of colour and 1.5% of which are UK citizens. Seven companies account for over 40% of directors of colour in the FTSE 100, whilst 53 of the FTSE 100 do not have any directors of colour at all.
Beyond One by ‘21 notes that the UK population and its workforce has changed dramatically over the past 40 years and will continue to do so. The report estimates that the UK will be the most diverse country in Western Europe by 2051, with over 30% of the population expected to be comprised of people from ethnic minority or migrant backgrounds.
Sir John Parker, who was appointed in 2015 to chair the industry-led review, said: “The Boardrooms of Britain’s leading companies do not reflect the ethnic diversity of either the UK or the stakeholders that they seek to engage and represent. Ethnic minority representation in the Boardrooms across the FTSE 100 and 250 is disproportionately low.
“Many business leaders would agree that Boards that embrace gender and ethnic diversity benefit in their decision making, by drawing on an array of skills, experience and diverse views. We hope the recommendations made for consultation, will heighten awareness of the growing pool of talent in the ethnic community, and help to strengthen Boardrooms across the UK and keep corporate Britain at the forefront of global business.”
The Review makes a series of recommendations for consideration, to better prepare UK companies for the long-term and help to continue their standing as global leaders, including:
Increasing the ethnic diversity of UK Boards
- Each FTSE 100 Board should have at least one director of colour by 2021, and each FTSE 250 Board by 2024.
- Nomination committees of all FTSE 100 and 250 companies should require their human resources teams or search firms (as applicable) to identify and present qualified people of colour to be considered for Board appointment when vacancies occur.
- The relevant principles of the Standard Voluntary Code of Conduct for executive search firms, in the context of gender-based recruitment, should be extended to apply to the recruitment of minority ethnic candidates as Board directors of FTSE 100 and 250 companies.
Developing candidates for the pipeline and plan for succession
- FTSE 100 and 250 companies should develop mechanisms to identify, develop and promote people of colour within their organisations to build a pipeline of Board capable candidates and their managerial and executive ranks appropriately reflect the importance of diversity to their organisation.
- Led by Board Chairs, existing FTSE 100 and 250 Board directors should mentor and/or sponsor people of colour within their own companies to ensure their readiness to assume senior managerial or executive positions internally, or non-executive Board positions externally.
- Companies should encourage and support candidates drawn from diverse backgrounds, including people of colour, to take on Board roles internally (e.g., subsidiaries) where appropriate, as well as Board and trustee roles with external organisations (e.g., educational trusts, charities and other not-for-profit roles). These opportunities will give experience and develop oversight, leadership and stewardship skills.
Enhancing transparency and disclosure
A description of the Board’s policy on diversity should be set out in a company’s annual report, and this should include a description of the company’s efforts to increase, amongst other things, ethnic diversity within its own organisation, including at Board level.
Companies that do not meet Board composition recommendations by the relevant date should disclose in their annual report why they have not been able to achieve compliance.
Sir John added: “This is not an exercise of tokenism; the recommendations are underpinned by strong industrial logic and the need for UK companies to be competitive in the increasingly challenging global marketplace.”
A consultation period will now open for comments to be taken. A report containing the final recommendations and findings of the Review will be published in 2017.
Tom Shropshire, Corporate partner at Linklaters, who was involved as a member of the Review Committee, said: “The Steering Committee does not believe that it matters whether the changes recommended are understood through the lens of changing demographics, the recognition by key stakeholders (including governments, shareholders, employees and consumers) that companies should reflect valuable societal and cultural norms, or because successful corporate leadership needs to benefit from diversity of thought and improve decision-making. Each and all of these elements may be reason enough to change on their own; however, when taken together, the case for change becomes more clear and compelling.”
He also said: “At Linklaters, as a global law firm, improving diversity and inclusion are global priorities for us. We know there is no one silver bullet solution to achieving significant and sustainable change and it’s not something that can happen overnight. However, we are making this part of our DNA and are focused on the actions we need to take to further enhance our own culture and deliver on our own ambitions.”
The full report can be accessed here.