Addressing the Balance: UK company boards make slow progress on BAME appointments in 2020 with significant improvements towards gender parity
November 21, 2020
3 min read
What's going on here?
BAME appointments to the boards of some of the largest UK companies have stalled in 2020, while board gender parity has significantly progressed.
What does this mean?
According to the 2020 UK Spencer Stuart Board Index which analysed the composition of boards in the largest 150 companies in the FTSE rankings between 1 May 2019 – 30 April 2020, BAME (Black, Asian and Minority Ethnic) directors account for just 8% of directors across the country.
While this represents an almost two-fold increase since 2015, the number of BAME executive directors has fallen by half, currently standing at 2.6%. Earlier in 2020, the Parker Review, an independent review into the diversity of UK boards conducted by Sir John Parker, found that in the FTSE 100, 37% of companies had no BAME representation on their boards, while only six BAME directors hold a CEO role.
In comparison, the 2020 UK Spencer Stuart Board Index reports more optimistic figures for women. For the second year running, the majority of newly appointed directors are women who sit at 51%. Nevertheless, this is not reflected at the executive levels, with the pace of change being described as “glacial”. What’s more, BAME women are almost twice as susceptible than white women to be employed in insecure roles.
These figures mark a stark contrast to the equivalent companies in the US, where BAME directors represent almost a fifth of top companies.
What's the big picture effect?
This story raises questions about diversity within top businesses, diversity in law firms and how undiverse law firms can help their clients improve in this area.
Firstly, pressure is mounting for companies who committed to the “One by 21” goal put forward by the Parker Review in 2017, which should have appointed “at least one non-white director by 2021 for the FTSE 100”. The above figures hint that this is unlikely to be achieved. In the meantime, various businesses and business groups such as L&G and business group the CBI back tougher targets. For example, L&G have stated that failure to act will result in L&G “voting against the re-election of the firm’s nomination committee chairmen” that make board appointments.
Secondly, diversity is an issue in itself for law firms, where, as reported by the SRA, 49% of lawyers in firms are women with only 33% being partners, while 21% of all lawyers are of a BAME background. It is notable that only 3% of this figure represent Black lawyers, with just six partners being Black at Magic Circle firms (two of the five firms have no Black partners whatsoever). Nonetheless, it remains in firms’ interests to encourage clients to grow diverse talent pools at all levels. It is therefore likely that advisory work on this matter will continue to grow.
Finally, vast quantities of studies demonstrate the benefits of a racially and gender diverse workforce with regard to increased profit (for example, see McKinsey’s study here and Credit Suisse’s study on gender diversity here). However, it is probable that law firms will encounter hurdles when advising clients on increasing the diversity of their workforce given their own lack of diversity. Marketing plays a significant role in a law firm’s ability to acquire new clients and it is therefore vital for a firm to show it is making efforts with regard to diversity (as well as in other areas such as ESG related matters). As much as a law firm considers the impact of a new client on its reputation, a client will make the same assessment of a law firm it is considering as potential representation. In this way, it is likely that these two-way decision making processes will be higher on both law firm and company agendas.
With the most recent Black Lives Matters protests continuing to be at the forefront of public discourse, it remains to be seen whether those commitments towards greater diversity made in recent months by large companies were genuine or merely a form of brand activism. Certainly, the 2021 UK Spencer Stuart Board Index will be a strong indicator of any progress to this end.
Report written by Edie Essex Barrett
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