Although most FTSE 100 companies have met the UK’s target of having at least one minority ethnic director on their boards, more needs to be done to improve diversity on company boards, according to the government-backed Parker Review, which has published the results of its latest voluntary census on the ethnic diversity of FTSE 350 company boards. So it has announced new targets to boost much-needed racial diversity and representation on UK company boards.
The report, carried out jointly with the Department for Business and Trade, revealed that 96 FTSE companies now have at least one minority ethnic director on their boards, as of 31 December 2022 (up from 89 last year). Of these 96 FTSE 100 companies, 49 companies have more than one minority ethnic director on their Board.
FTSE 250 companies are slowly making progress towards the 2024 deadline of appointing at least one minority ethnic director, with 67% of companies that responded meeting the target in 2022, up from 55% last year. Of the four companies which have not met the target, one company has been acquired since December and is no longer part of the FTSE 100.
Currently, 18% of all FTSE 100 director positions are held by directors from a minority ethnic group (190 roles held of a total of 1064 positions). In the FTSE 100, 31 of the chair and executive director positions were held by a minority ethnic director, comprising six people from ethnic minorities who held the position of Chair; seven who were CEOs; nine who were CFOs and nine other executive directors. This means that people from ethnic minorities now hold about 10% of these particularly influential positions.
REVIEWING OLD TARGETS
In its first report in 2017, the Parker Review made a series of recommendations and set a “One by 2021” target for all FTSE 100 boards to have at least one director from a minority ethnic background by December 2021. The Review also set a similar “One by 2024” target for all FTSE 250 boards.
In the FTSE 250, 149 companies had at least one director from a minority ethnic background. This represents 67% of companies that responded to the census and equivalent to 60% of all FTSE 250 constituents. There are a further two years remaining to reach the 2024 target for each to have at least one minority ethnic director.
Directors from a minority ethnic group hold 11% of all director positions within the FTSE 250 companies that responded (188 of 1749 positions). In the FTSE 250, 34 of the chair and executive director positions were held by a minority ethnic director, comprising five people from ethnic minorities who held the position of Chair; 14 who were CEOs; 10 who were CFOs and there were five other executive directors.
NEW TARGETS FOR SENIOR MANAGEMENT
The Parker Review Committee said it is pleased with the progress being made within the FTSE 350. However, equal access to board positions needs to be matched by actions across all levels in business to ensure that diverse talent, including those from a minority ethnic background, are given equal opportunities to contribute to the success of UK businesses.
Following discussions with a number of businesses and representative bodies over the past 12 months, the Parker Review believes it is now the right time to set targets for senior management positions (defined as the Executive Committee and the senior managers who report directly to Ex Co members).
Given the wide variation in the share of ethnic minorities in the population in different regions of the UK, the Parker Review recognises that there can be no “one size fits all” target percentage for ethnic minority executives in senior management. The Review will therefore ask each FTSE 350 company to set its own target for its business, for December 2027, for the percentage of its senior management team who identify as being from an ethnic minority. The Review also strongly encourages companies to describe in their annual reports the management development plans they have in place to help create a diverse and inclusive pipeline of talent.
NEW TARGETS FOR PRIVATE COMPANIES
The Parker Review believes there is also compelling logic for setting targets for inclusion of ethnic minorities within large private companies given the significant role they play in the UK economy and society. The Review will therefore ask 50 of the UK’s largest private companies to provide data from December 2023.
To track progress, the Review will set a target for each of these 50 large private companies to have at least one ethnic minority director on its main board by December 2027. In addition, each company will be asked to set its own target for its business, for December 2027, for the percentage of its senior management team who identify as being from an ethnic minority.
“Our latest data demonstrates that continuing progress is being made by FTSE 350 companies to bring ethnic minority directors on to their boards. The target we set in 2017, to have at least one ethnic minority director in every FTSE 100 boardroom, has effectively now been reached,” commented David Tyler, Chair of the Parker Review Committee.
DEVELOPING ETHNIC MINORITY EXECUTIVES
“We have long argued that companies benefit from ensuring that succession planning and management development plans include the development of ethnic minority executives. That’s why we are now asking each FTSE 350 company to set its own five-year target, for December 2027, for the percentage of senior management positions that will be occupied by ethnic minority executives,” added Tyler. “We believe this will benefit the companies and it will help to provide equal opportunities for people from minority ethnic communities.
“In addition, we recognise the growing importance of private companies to the UK economy and society. We are asking 50 of the UK’s largest private companies to set a target of appointing at least one minority ethnic director on its main board by December 2027. Further, we are asking each of them to set a target for the percentage of ethnic minority executives within their senior management teams by the same date.”
With more and more boardrooms voluntarily hitting their ethnicity targets this year, “it’s clear that UK companies are on the right course for achieving true diversity in business,” added Nusrat Ghani MP, Business and Trade Minister. “There’s still more to do however, and the Parker Review’s recommendations clearly set out how companies must improve diversity from top to bottom in the coming years, so they can make the most of untapped talent available and ensure British boardrooms and senior management teams are truly reflective of British society.”
DIVERSITY NOT JUST A BOARDROOM ISSUE
“I’m proud to support the Parker Review and grateful to the Steering Committee and my colleagues involved for their work and commitment to this important issue. The findings this year demonstrate that good progress is being made across FTSE 350 companies,” noted Hywel Ball, EY UK Chair and UK&I Managing Partner.
However, diversity “can’t just be a boardroom issue,” added Ball. “Companies need to ensure they are taking action across every part of their business. As leaders we have an important role to play by setting the tone from the top, ensuring that we are fostering diversity of thought and creating equal access for all. Additional targets will drive further change, helping to break down barriers and improve the diversity of UK business.”
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