FRC: 'Significant challenges' remain for greater board diversity among FTSE 100 and FTSE 250 firms

Firms have made good progress in advancing diversity on their boards but “significant” challenges still need to be addressed, a recent report commissioned by the Financial Reporting Council (FRC) has revealed.

The research, conducted by Cranfield University and Delta Alpha Psi Services, found that minority ethnic individuals experienced challenges of being overlooked for promotion and overt and covert racism.

Challenges also included having to demonstrate higher standards compared to their counterparts when progressing to the boards of FTSE 100 and FTSE 250 companies, the report found.

“I hope this report can help advance the conversation about how to successfully increase diversity in senior positions on boards and create sustainable pipelines of diverse talent to fill both executive and non-executive roles,” said Sir Jon Thompson, the FRC’s CEO.

The report revealed, through interviews with senior leaders from ethnically diverse backgrounds, that they had to adopt strategies such as “blending in” to “minimise their difference” or “stand out to define their brand and celebrate their difference”.

In March 2021, the Parker Review Committee found that 81 FTSE 100 companies had ethnic minority representation on their boards meeting the Review’s ‘One by 2021’ target of having at least one director with a minority background by December 2021. FTSE 250 firms have until 2024 to meet the same target.

Participants noted the increase in awareness of the Black Lives Matter (BLM) movement during 2020 encouraged a “significant positive shift in the quality of conversations about organisation approaches to race and ethnic diversity”.

This momentum and the focus on creating a culture of belonging “needs to be sustained”, the regulator said.

“Our research shows that it’s essential for organisations to continue to build trust among their employees,” said Dr Deirdre Anderson, director of the Gender, Leadership and Inclusion research centre at Cranfield University, and lead author of the report.

“Not only will this encourage self-identification against all diverse demographics, it will also provide accurate and complete data for monitoring progress against race and ethnic equality goals. This will help organisations expand on existing good practice and continue to dismantle the existing structural barriers towards greater equity.”

Lack of quality reporting

The FRC highlighted there were many examples of companies “publicly reporting targets, pay gaps or performance metrics”.

However, the report found there was “insufficient monitoring, measurement and accountability built in” to companies’ “targeted race and/or ethnicity programmes”. As such, this is contributing to a lack of “explicit outcomes” on company diversity objectives.

Furthermore, data collection on race and ethnicity should “go beyond considering and grouping ‘ethnic minorities’ and instead explore the differences between experiences and career outcomes”, it said.

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