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The Parker Review Committee publishes its final report on the ethnic diversity of UK boards

  • Corporate Governance  Image

24 Oct 2017

The Parker Review Committee has published its final report on the ethnic diversity of UK boards

Sir John Parker published his initial report on the ethnic diversity of UK boards in November 2016 ‘for the purpose of consultation and debate amongst business leaders, regulators and lawmakers”. The consultation period closed on 28 February 2017 and the final report (‘the Report’) has now been issued, including recommendations for companies and for executive search firms.  

‘Beyond One by ‘21’, the Report, highlights as a general matter that the boardrooms of the UK’s leading public companies do not reflect the ethnic diversity of either the UK or the stakeholders that they seek to engage and represent. The Report finds that “ethnic minority representation in the boardroom across FTSE 100 is disproportionately low, especially when looking at the number of UK citizen directors of colour”.

Key findings with regards to FTSE 100 Board diversity include:

  • 1050 director positions in total;
  • 85 individual directors of colour (four hold two board positions);
  • total directors of colour represented about eight per cent of the total, compared to 14% of the UK population;
  • 51 out of the FTSE 100 companies did not have any directors of colour;
  • seven companies accounted for 40% of the directors of colour;
  • five out of these seven companies have headquarters historically located outside the UK; and
  • only six people of colour held the position of Chair or CEO.

The key recommendations of the Report are:

 Increase in Ethnic Diversity of UK Boards

  • Each FTSE 100 board should have at least one director of colour by 2021; and each FTSE 250 board should have at least one director of colour by 2024.
  • Nomination committees of all FTSE 100 and FTSE 250 companies should require their human resources teams or search firms (as applicable) to identify and present qualified people of colour to be considered for board appointment when vacancies occur.
  • Given the impact of the ‘Standard Voluntary Code of Conduct’ for executive search firms in the context of gender-based recruitment, the Report recommends that the relevant principles of that code be extended on a similar basis to apply to the recruitment of minority ethnic candidates as board directors of FTSE 100 and FTSE 250 companies.

     Develop Candidates for the Pipeline & Plan for Succession

    • Members of the FTSE 100 and FTSE 250 should develop mechanisms to identify, develop and promote people of colour within their organisations in order to ensure over time that there is a pipeline of board capable candidates and their managerial and executive ranks appropriately reflect the importance of diversity to their organisation.
    • Led by board Chairs, existing board directors of the FTSE 100 and FTSE 250 should mentor and/or sponsor people of colour within their own companies to ensure their readiness to assume senior managerial or executive positions internally, or non-executive board positions externally.
    • Companies should encourage and support candidates drawn from diverse backgrounds, including people of colour, to take on board roles internally (e.g. subsidiaries) where appropriate, as well as board and trustee roles with external organisations (e.g. educational trusts, charities and other not-for-profit roles). These opportunities will give experience and develop oversight, leadership and stewardship skills.

    Enhance Transparency & Disclosure

    • A description of the board’s policy on diversity should be set out in a company’s annual report, and this should include a description of the company’s efforts to increase, amongst other things, ethnic diversity within its organisation, including at board level.
    • Companies that do not meet board composition recommendations by the relevant date should disclose in their annual report why they have not been able to achieve compliance.

    The Report includes two appendices – A: Questions for Directors and B: The Directors’ Resource Toolkit to help UK companies enhance the ethnic diversity of their boards and to help existing boards to deliver on the Report’s recommendations.

    The Parker Review Report is available on the BEIS website here.

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