LexisNexis Market Tracker Trend Report - Corporate Reporting on Ethnicity (6)

LexisNexis, the legal information publisher, has put out a 2020 study of corporate governance reporting on ethnicity as part of its series of Market Tracker Trend reports, to which I was able to contribute some thoughts.

It is research that provides food for thought for all businesses, although its focus is on the FTSE100 and the 2017 independent Parker Review into the ethnic diversity of UK boards, which found that directors from an ethnic minority background are vastly under-represented on the boards of the UK's leading companies.

As described in the report, there is growing recognition that general terms such as “BAME” are at risk of hiding chronic under-representation in the UK of particular minorities. There may be no quick fixes but outreach at an earlier stage to schools and colleges, mentoring and enlightened recruitment practices can work long term to develop the talent that is there and is currently overlooked.

Indeed, a point emphasised in the Parker Review is that although its focus is on ethnic diversity, its observations and recommendations can apply more broadly. The conclusion that leadership of UK companies needs to be more inclusive and open is in no way limited to the country's biggest companies - everyone can do better.

It can be tempting to agree on the importance of diversity while stressing that appointments are always made on merit, with the best candidate winning through. But companies need to define what “best” means and not just replicate the status quo.

Recruiters need to think in broader terms, seeing that diverse experience can bring other much needed qualities to the boardroom and to senior management teams. Targets set by the board for itself and for candidates put forward by recruiters is one option.

While the report finds that a number of organisations have set themselves against target-setting, this should be no barrier to increasing inclusion. In the context of premium listed companies on the London Stock Exchange, subject to the UK Corporate Governance Code with its emphasis on best-practice, there is requirement for formal and transparent appointment procedures based on objective criteria and, separately, feedback on how board evaluation has been carried out.

Such reporting, done well requires a description of the place of ethnicity in that process.

Measuring progress requires access to data and a commonly heard stumbling block, the report suggests, is that employees are often unwilling to provide ethnicity data.

There may be reticence from employees to provide ethnicity data for any number of reasons. But perhaps this suggests a wider cultural issue.

Companies should be able to explain to all stakeholders why information is being requested and the purpose it will be put to. Demonstrating a commitment to equality and explaining through all available workforce communication channels how that is to be achieved, generates internal trust such that this data will be supplied.

And establishing and maintaining a good corporate culture - and openness must be part of that - is, of course, one of the main responsibilities of the board.

This blog provides a personal view only and is not intended to be, and should not be taken to be, legal advice.