Britain, We Have A Problem: FTSE 350 And Diversity In Business
After almost a decade of UK government efforts to encourage FTSE 350 businesses to work towards true diversity across gender, race and ethnicity among their senior management teams, research just out blows apart the notion that there is any real momentum in the achievement of these goals.
Just 15% of FTSE 100 companies report against all four measures that are required in section B.2.4 of the current corporate governance code on diversity reporting, according to research done by the University of Exeter Business School for the UK’s corporate governance watchdog, the Financial Reporting Council (FRC).
The Code, which takes effect from 1 January 2019, calls on boards to include in their annual reports a description from their nomination committee of how they have applied the company’s diversity policy including how this links to progress on achieving company objectives. Analysis of data currently available suggests that, to a large extent, this is simply not happening.
“While the trend is upwards, given the increased prominence of diversity as a strategic business issue, we would have expected to find more of our largest companies providing meaningful information about their approach to boardroom diversity and offering real insights into the actions they are taking to increase diversity and progress against any objectives set” states the analysis by Professor Ruth Sealy, Associate Professor of Management and Director of Exeter Centre for Leadership.
“Our research revealed some companies’ sophisticated understanding of the contribution diversity can make to their business - as the optimal utilisation of talent and a significant strategic issue. However, many organisations appear to still have a minimalist ‘tick box’ approach and need clearer strategies to drive greater diversity at senior management levels” she said on the release of the report.
Despite legislation on company reporting on gender and independent government-backed reviews on race in the workplace and the need for ethnic diversity in UK boardrooms as well as a myriad of diversity initiatives including the latest - and public encouragement via media coverage, British business appears fiercely resistant to change when it comes to diversity.
Yet change, including the demands of technological transformation and new working business models, is all around us.
And for all the talk about gender diversity in the United Kingdom outside FTSE 350 boardrooms since 2011, the images below are a snapshot of the reality within.
It wasn’t until 2014 that Lloyds Banking Group became the first FTSE 100 company to publicly set itself gender diversity targets for senior management at 40% of their top 5,000 senior management posts globally to be held by women by 2020. Since then, many other listed and professional services companies have followed suit. But this is far from being the norm across the entire FTSE 350.
Lloyds Banking Group also became the first FTSE 100 company in 2017 to set itself a target for ethnic diversity in senior roles at 8% of its top 7,500 senior management.
There has generally been a strong tendency among businesses to cite the difficulty of collecting meaningful data on ethnicity as the reason why it is never done - it was certainly a response often given to Ruby McGregor-Smith during her review.
“Data keeps us honest” said Helena Morrissey, long in the public eye fighting for female progression in the financial services industry at an event held earlier this month held by the Diversity Project in London (which I attended and covered in my Governance Watch column.)
But it is only recently that we have begin to connect data with not just gender diversity, but diversity and real inclusion. Mrs Morrissey is also one of the IPPR’s Commissioners responsible for the report just out on the multiple challenges facing Britain today, covered in the last Board Talk.
This pace of change in British business is glacial when you set it against the urgency of the need for better representation in business of its stakeholders and its customers. Take a look at the table below, and weep.
Britain, we have a problem.
FTSE 350 businesses are just not getting the urgency of the need for diversity for better representation and to reflect a changing demographic in terms of global customers. “Virtually no companies reported that they had initiatives to increase ethnic diversity specifically at senior management levels” says the report.
When it comes to board evaluation, finally under much-needed scrutiny, “it is disappointing to see that the number of companies specifying that diversity is a focus of their board evaluation, including those specifically mentioning gender, has gone down since 2014” says the report.
This is an excellent report, and kudos to Professor Ruth Sealy @RuthSealy on Twitter, where she has been a long-suffering follower of mine for a long time.
In commissioning it, is this the face of a new-look FRC ?
Finally, they say that insanity is doing the same thing again and again and hoping for a different result. There have been many words spoken about the need for diversity in business for a decade now. Yet we do not insist on accountability.
“In terms of clear accountability, only nine (9%) of the FTSE 100 companies and 14 (6%) of the FTSE 250 companies specified a person or a role held accountable for the success if any initiatives or objectives set” says the report.