Large private firms lag behind FTSE 350 on ethnic diversity, report finds

The UK’s largest private companies are lagging behind the FTSE 350 when it comes to ethnic diversity on their boards. The boardrooms of listed firms are becoming more ethnically diverse but more still needs to be done, especially in those large private businesses. 

Those are the findings of the latest Parker Review which has just been published setting out the 2023 results of its voluntary census on the ethnic diversity of the boards of FTSE 350 companies and 50 of the UK’s largest private companies. It has been carried out jointly with the Department for Business and Trade, sponsored by EY, and it shows there has been considerable change within the top 350 companies. In summary:

- FTSE 250 companies are making progress towards the December 2024 deadline of appointing at least one ethnic minority director, with 79% of responding companies meeting the target in 2023

- 96 FTSE 100 companies met the target of at least one ethnic minority director on their boards, in line with last year

- There are now 12 ethnic minority CEOs in the FTSE 100, up from 7 in 2022

The BBC reports on this and quotes David Tyler, chair of the review's committee, who told the BBC's Today programme companies were taking the issue seriously as it was having a positive impact on their bottom line. He said ‘There's a benefit to them, in terms of their own profitability, of having a wide, much higher quality of debate. You get that by having diverse members of your team both at the board and at the senior management level.’

Personnel Today quotes EY’s UK chair Hywell Ball who makes a good point about diversity and the current challenging economic climate. He says: “The Parker Review, and the targets that it sets, provide an important benchmark and objective criteria to increase the representation of ethnic minorities across UK business. Crucially, it ensures that efforts to diversify UK business are led from the top down and that, as leaders, we continue to be held accountable – regardless of the macroeconomic climate.” 

We agree with that, diversity does need a top-down approach and we’ve noticed across our own client base that it’s those firms that taken that point, and embraced it, that are making the most progress. Shuabe Shabudin is a D&I specialist who is part of a team helping clients to improve ethnic diversity on their boards and earlier he joined me by video-link to discuss it. He told me step one is convincing the board itself: 

Shuabe Shabudin: “It’s something that's often spoken about and clients will often say, particularly those clients that are in a straight HR background, that they find it difficult to break through that wall, to break through the ceiling to get up to C-suite, to get up to the board, and I often refer to it as being a carrot and a stick. So, the carrot is, morally and ethically these are just the right things to do. However, sometimes we do have to be honest and the stick approach needs to be used. The stick approach, for me, is well how does this add to my bottom line? It’s all very well what you're saying, Shuabe, I’d love to do that but I haven't got the funds to, I don't know that it will make any money or make any savings if we if we take your advice. So, when there are reports such as this which highlight that there are still very, very, very big issues in relation to the recruitment and the retention, the hiring, of people from a minority ethnic background into senior positions, well, it just shows that there is work that still needs to be done. You can also look at it as a distinguishing factor. So, if there's work that needs to be done, it's a way to set yourself apart from your competitors, it's a good story to tell, again, both morally, ethically, and then also from a business-critical point of view. So, I say to the HR colleagues that I'm working with, look, use this information, use this data, use these reports, to show that it is a live issue, to show it's something that's important to people and then the way that you can make it a benefit is to say, and this is how we can make ourselves an employer of choice, this is what we can do to win, and retain, the best talent which is an ever increasing, or a continually difficult, task.”

Joe Glavina: “David Tyler, chair of the review's committee, is quoted by the BBC saying how diverse businesses are more productive and how this issue affects the bottom line. And there’s the wellbeing angle – diverse workplaces are happier. Would you agree?”

Shuabe Shabudin: “Yes to all of those points. There is a significant amount of empirical data which shows that a more diverse organisation is more productive. I think you could also say that an organisation which is more diverse will then be able to have a greater sense of belonging to all of the employees, belonging makes you happy, and I think we can all say that we work better when we are happy and when you're happier and you work better productivity increases and, of course, that's going to add to the bottom line as well there. From a reputation point of view, yes I think it's one of those scenarios where you want to be on the right side, you don't want to be on the wrong side. If you are known as an organisation that doesn't have any level of diversity, or an acceptable level of diversity, if I can call it that, that's obviously going to act as a negative indicator, or if you can seem to be taking steps genuinely to be furthering the levels of diversity in your organisation, it's going to be something that people warm to and, nowadays, with Gen Z or the Alphas as we're going to be coming to, these kinds of issues are much more important to them than whether they get a company car and gym membership, for example. So, very important reasons, very important factors to take into account as well.”

Joe Glavina: “It’s interesting how the data shows a lot more progress has been made on gender diversity than ethnicity and I wonder if that’s connected to the way the two are regulated. So, gender pay gap reporting is mandatory but ethnicity pay gap reporting is purely voluntary. Is that a factor, do you think?”

Shuabe Shabudin: “Quite possibly, Joe, yes. I think that's an interesting way of looking at it and, perhaps, not least because whether or not ethnicity pay gap reporting is going to be made mandatory is something we've been discussing literally for years. So, I think it could well be that it is therefore seen as something that is of - gosh, can I say less important, or less business critical, less impending, because of that and, certainly, there are more structures in place to deal with the gender inequality that there may be in a work in a workforce. So, I think there's something in that and, again, it's another ceiling, perhaps, it's another barrier, that might need to be broken through by HR. But coming to the points we were discussing before, one of the ways is to use this data to say look, this is how we can set ourselves apart in a positive way.”

This latest update report from the Parker Review, an 89 page-long report, is called ‘Improving the Ethnic Diversity of UK Business, March 2024’ was published last week. We’ve included a link to it in the transcript of this programme for you.

LINKS

- Link to Parker Review report
- Link to BBC article: ‘More ethnic minority chief executives at top UK firms’