Continuing Absence Of Ethnic Diversity In FTSE 100 = Short-Termism And Risk
The United Kingdom is made up of many faces, and not all of them are white and male. But you might be forgiven for thinking that they are, looking at a high percentage of the leadership at Britain’s largest companies. Forty-seven of the FTSE 100 still have no executives who are black, Asian or minority (BAME) and there are none in the boardroom. The total number of BAME board members (across executive and non-executive) has decreased to 7.4%, down from just under 9% last year, according to a report.
In 2019, when the world is talking more and more of the need for any sustainable business to define its purpose and role in society, this continuing paralysis on broader representation and inclusion at Britain’s largest companies might infer a climate of insularity and being out of touch. It is short-term thinking not to embrace demographic change as it happens among your stakeholders. It is, surely, a massive risk.
As a snapshot of the composition of leadership in the FTSE 100, it is also uncomfortable timing. It comes just days ahead of a general election that has been swirling in a tortuous and self-consuming manner around the country’s 2016 divisive vote to leave the European Union. This issue of the lack of ethnic representation at the top of British business is not new - I have been covering it for the last decade - but it has clearly been ignored, like much else, since that vote.
“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” Sir John Parker said to me in 2016, when I interviewed him as the author of the Parker Review on ethnic representation in the FTSE 100. It set a target for the appointment of at least one board-level director from a BAME background by 2021. While the government has been charting progress on this, the follow-up to the review found that the number of FTSE 100 directors with BAME backgrounds had declined, and the next update has been delayed until next year, due to the election.
It appears to be like the battle for gender diversity, only harder, which was clear in this piece I wrote in 2015 on Forbes.
More than three years ago, Sir John Parker said he hoped that his report would draw attention to the change in demographics around us, and not only in the UK. In population growth forecasts from Pew Research in June 2019, six countries are projected to account for more than half of the world’s population growth through the end of this century, and five of them are in Africa. While the sharp fall in the value of the pound around Brexit uncertainty in the last three years may have benefited the FTSE 100 with the bulk of sales outside the UK, aligning its customer base means - as Sir John said in that interview - acknowledging the need for ethnic diversity.
Green Park, the recruitment consultancy responsible for the report, has called on the FTSE 100 to appoint a ‘Chief Diversity Officer’ to take charge of this agenda, as many companies have done in the United States. On that, it is worth looking at this piece from the executive search firm Russell Reynolds, written in March this year.
The pool of talent in which we all fish is changing, Sir John Parker told me more than three years ago. “It behooves leadership of the FTSE 100 and FTSE 250 to take account of this in succession planning in the boardroom” he added.
There can be no commercial reason not to act on this now in the UK’s largest businesses. But there may be many reasons for business inaction around company culture, and also around complacency. For change to happen, there has to be the will, and leadership looking well beyond its own tenure. Most importantly, there has to be a willingness to look at innovation in the structure of boardrooms and also in the appointment process - covered earlier on Board Talk.
It is now apparent that in the slow progress on gender diversity in the last decade there has never been a shortage of supply when it comes to the women. At first there were a lot of initiatives and businesses set up around how to change the women to fit in to existing boardroom structures complete with their networks, before they could be considered potential candidates. Such initiatives will doubtless continue, but it is also a big reason why we are in danger of groupthink, even when it comes to diversity.
Not acknowledging uncomfortable realities publicly but skirting around them has become a very British talent in many circles, but it is neither helpful nor productive in the long-term.
Sir John Parker acknowledged an important reality to me in 2016. “Some people (in the UK)—and maybe even some chairmen—find religion and ethnic diversity very hard to talk about in comfort” he said. And there you have it - that’s why every time there is a report, or a review into race and ethnicity in this country it commands a brief flurry of attention, which soon dies a death. But it’s an unappealing image with which to command attention in a modern world.
Image credit: James Orr on Unsplash
