Diversity’s just beyond the pale

The UK’s record on boardroom ethnicity is “totally unacceptable”, says Sir Jon Thompson, CEO of the Financial Reporting Council.

He believes it is wrong that talented people are being excluded form succession and leadership because companies are failing to put in place appropriate policies on boardroom ethnicity.

Where are the targets, he asked. Sir Jon also wondered why companies are not monitoring their progress against set policies.

FRC research has found that over half of FTSE 250 companies (52%) fail to mention ethnicity in their board diversity policy, and most of the FTSE 350 do not set measurable ethnicity targets at all.

Just 14% of FTSE 100 companies set measurable objectives for boards’ ethnic diversity, while the FTSE 250 companies figure is a meagre 2%.

Even when objectives have been set, no FTSE 350 companies report progress against them.

To address this failing, the FRC said it expects much-improved reporting by companies under the new UK Corporate Governance Code, which promotes diversity in appointments and succession plans, including ethnic diversity.

The research, which was undertaken by Cranfield University’s School of Management, also found that while 11% of FTSE 100 and 4% of FTSE 250 companies plan to increase ethnic diersity in the succession pipeline, most focus on general progression rather than specifically focusing on senior management.

The 2020 Parker Review, which includes the FRC research, showed that 150 companies out of 256 (59%) did not have at least one director of colour on their boards.

To improve ethnic diversity, the Parker Review has recommended that each FTSE 100 board should have at least one director of colour by 2021 and by 2024 for the FTSE 250.

Sir Jon said: “A more diverse boardroom leads to better business outcomes, which is why the UK Corporate Governance Code, and now the UK Stewardship Code, requires companies and investors to promote diversity and inclusion.”

He promised that the FRC will now monitor closely how companies report on their lack of progress in this area.

  • The UK Corporate Governance Code was strengthened in 2018 to promote diversity including gender, social, and ethnic backgrounds in UK boardrooms. A separate section of the annual report should include a description of the board’s policy on diversity, including any measurable objectives it has set, and progress on achieving those objectives.