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FTSE 100 firms hit boardroom diversity targets but fail at executive level

Nearly all Nearly all FTSE 100 companies have at least one representative from an ethnic minority on their board.
Nearly all FTSE 100 companies have at least one representative from an ethnic minority on their board. Photo: Getty

Nearly all of Britain's biggest FTSE 100 (^FTSE) companies have appointed a minority ethnic member on their boards in time to meet the government's diversity boardroom targets.

However, despite the progress, the latest Parker Review Committee (PRC) found that the overwhelming majority of board positions occupied by people of colour were non-executive directors.

A census from the Department of Business, Energy & Industrial Strategy published on Wednesday shows that 94 of FTSE 100 firms have a minority ethnic director representation on their boards.

This was 74 in November 2020 and an increase from five years ago when just half had people from non-white communities in their boardrooms.

For small and mid-cap FTSE 250 (^FTMC) firms, 128 or 55% of the index, had at least one ethnic minority director at boardroom level by the end of 2021.

The report said three FTSE 100 companies were at advanced stages in recruitment, while three have no ethnic minority representation.

Of the three firms that have not signalled a commitment to diversity, one is Russian steelmaker Evraz (EVR.L), which was mentioned in sanctions against its largest shareholder Roman Abramovich last week, and is leaving the FTSE 100 index.

The second is defence firm Meggitt (MGGT.L), which has been acquired by a US group and will de-list, and the third is Dechra Pharmaceuticals (DPH.L).

Read more: UK ethnic minority women lost jobs and paid less during pandemic, data shows

The report, set up by the government in 2015, is based on voluntary submissions from companies. The aim of the review is to ensure that every FTSE 100 company has at least one ethnic board member by December 2021 and for every FTSE 250 company by the end of 2024.

Ethnic minorities are defined as people who "identify as or have evident heritage from African, Asian, Middle Eastern, Central and South American regions."

Image: Parker Review/EY
Image: Parker Review/EY

Approximately 16% of all FTSE 100 board positions are held by minority ethnic directors, this is 164 out of the 1,056 positions, and about a tenth of board positions of the FTSE 250 firms.

The majority of the hires for both the FTSE 100 and FTSE 250 have been for non-executives given the boards typically only have two key executive roles, CEOs and CFOs.

According to the review, progress remains "slow" in these areas with only six chief executives from a minority ethnic background leading FTSE 100 companies, and 16 across the FTSE 250.

At chair level this number reduced even further, with three in the FTSE 100 and five in the FTSE 250.

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It comes as pressure for more diversity at top levels increased from investors and customers after the killing of George Floyd in the United States in 2020.

"Over the last five years, there has been a sea change within listed companies with regards to inclusion and diversity," the report said. "This has been affected by the success of the ‘Women on Boards’ initiatives and by the impact that the murder of George Floyd in 2020 had on the British business community, just as it did in the United States."

"FTSE 100 firms have stepped up when it comes to ethnic diversity at the top. Now it’s time for those last few companies to follow suit and end the all-white boardroom," said Lord Karan Bilimoria, CBI president and chair of Change the Race Ratio.

Sir John Parker, chair of the PRC is stepping down from his role, with current co-chair David Tyler taking over as lead chair.

Tyler, warned that FTSE constituents should not think of the Parker Review targets as "one and done".

He added: "These numbers compare starkly and very favourably with the position in 2017 when only 51% of FTSE 100 companies had people from minority ethnic communities in their boardrooms.

"We hope companies will follow the most diverse of their peer group and expand the scale and depth of initiatives fostering inclusion and diversity right through organisations to help develop the next generation of talent."

Acknowledging that the achievements are just the start, Britain's business secretary Kwasi Kwarteng, said: "We want to foster a business environment in the UK where people have equal opportunity to succeed and progress in their career through merit and ability, rather than their ethnic background.

"While there is still more to do, today’s findings demonstrate the great strides being made – particularly at FTSE 100 level – to increase ethnic diversity on boards, as more of Britain’s biggest companies recognise the business case for diversifying their teams so that they better reflect the society we live in."

Watch: Why do we still have a gender pay gap?