Diversity Deficiency: FTSE 100 firms fail to reach diversity target

February 22, 2021

3 min read

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What's going on here?

A recent Parker review has revealed there are no black executives in any of the top three positions in FTSE 100 companies in the UK.

What does this mean?

In 2014 the Davies review conducted by Sir John Parker, the then chairman of Anglo American, aimed to improve boardroom diversity. Parker concluded that every company listed on the FTSE 100 should have at least one non-white director by 2021. Seven years later, it seems FTSE 100 companies have not only failed but have regressed. Following the retirement of Mondi’s chair, Fred Phaswana, there are now no black executives in the UK’s FTSE 100 companies. Dive a little deeper, and it appears BAME representation fares a little better. Only 10 out of 297 leaders (34%) are from BAME backgrounds – the same proportion when the Parker report was first published. Such data depicts a stale picture of UK commerce, with Trevor Philips commenting “the snowy peaks of British business remain stubbornly white”. 

Perhaps more worryingly, the snowy peaks of British business are unlikely to melt anytime soon. BAME candidates now make up 0.9% of the leadership pipeline, a decline from 1.4% in 2014. Trevor Philips, chairman of Green Park, believed this has been caused by a perception problem. BAME applicants are “looking up at the top 300 and concluding, based on the evidence, that I’m never going to be one of those people”.

What's the big picture effect?

A wider analysis shows a lack of diversity is not exclusive to FTSE 100 businesses. Diversity amongst the UK’s FTSE 250 is also in decline, with 69% of companies having no directors of colour. This is a worrying trend and one that businesses should consider resolving urgently. This is because diversity is not only the ‘right’ thing to do but helps to enhance business performance. A recent Diversity Best Practice survey has shown that one out of three customers choose brands based on the type of social or environmental good they do. Therefore, employing a more diverse workforce not only helps improve the business’ image but will also help to boost profits. Given this effect, it is unclear why FTSE 350 companies have not worked harder to improve diversity within their ranks. Admittedly the first step is often the hardest, but this is a poor excuse for a problem that is clearly hindering British trade. As such, a more proactive approach is needed so BAME candidates are encouraged to apply to FTSE 350 companies, helping to improve diversity in the future. 

This pro-diverse ethos is clearly displayed within the legal industry where firms have worked hard to address “historical imbalances”. For instance, Allen & Overy has recently named diversity and inclusion as one of their strategic business priorities for the new year. These approaches have worked well and there has been a steady increase in BAME lawyers entering the profession. According to the Lawyer Portal, one in five lawyers working at law firms are now from BAME backgrounds. Whilst these statistics are impressive, more work is needed to achieve the same level of diversity for BAME partnership, which currently stands at 20%. 

On the whole, FTSE 100 companies have failed to meet the Parker objective of having a black director before 2021. Whilst this fact is disturbing in itself, the problem appears to be more systemic, with FTSE 250 companies functioning in a similar manner. This trend hinders UK business, by neglecting BAME talent and reducing potential sales. In many ways, the legal sector is now a trailblazer for diversity and inclusion which FTSE 350 companies should look to follow. If a more proactive approach is adopted, it is likely UK business will not only thrive but become a whole lot more interesting along the way.

Report written by Luke Cuthbert

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