Where are we currently on the journey of a more diverse and inclusive culture in Corporate Britain?

With the recent release of the final Hampton-Alexander Review of FTSE Women Leaders and the update report from the Parker Review entitled “Ethnic Diversity Enriching Business Leadership” last year, it feels like the right time to pause and reflect on where Corporate Britain is on its journey towards a more diverse and inclusive (D&I) culture.

Gender Diversity

Final Hampton-Alexander Review 2021

There is no doubt that since the first Hampton-Alexander Review in 2016, much progress has been made to level-up and open opportunities to women on the FTSE 350 boards and the executive teams.  In 2016, a target of 33% women in leadership and on boards which appeared at the time ambitious and stretching was set. However, five years later FTSE 350 Boards have met, and exceeded the targets on average.  There are now four companies in the FTSE 350 with a female chief executive and chair.  However, despite the significant progress made in the last 5 years, there is much to be done.

FTSE 100

-        close to a third of them have not met the board target

-        over 40% of them which have not met the target on executive team (comprising the Executive Committee and Direct Reports)

-        only 14% of executive directors are women

-        14 companies have 2 or less women on board

-        women comprise only 26.5% on Executive Committee

FTSE 250

-        close to 40% of them have not met the board target

-        over 50% of them have not met the target on executive team (although 49 of them are said to be close to making the target)

-        there are 16 “One & Done” boards, showing a ‘tokenistic' approach to gender equality

-        women comprise only 21.7% on Executive Committee

Ethnic diversity

“Ethnic Diversity Enriching Business Leadership”- the update report from the Parker Review

This update report released in February 2020 is a sobering reminder that there is a fair way to go before we will successfully diversify our boardroom ethnically.  The Parker Committee laid down a challenge in 2017 that by the end of 2021, no member of the FTSE 100 would lack a person of colour as a director. It also encouraged FTSE 250 companies to meet this target by 2024. As of 31 December 2019, 37% of companies surveyed in the FTSE 100 and 69% of FTSE 250 have not met the target of at least one ethnic minority director on their board.  As the report states, this is not just about social justice, there are commercial imperatives for businesses to be more diverse and inclusive as they are the highest performing businesses.

Strong business case to support diversity and inclusion

Mckinsey Diversity and Inclusion Report (May 2020)

If there is lingering doubt that the more diverse and inclusive companies are not the highest performing ones, then the analysis undertaken by Mckinsey in a Diversity and Inclusion report released in May 2020 should firmly dispel such doubt. This analysis shows a strong business case for both gender diversity and ethnic and cultural diversity in corporate leadership.  For the five years in which Mckinsey has undertaken this research, it has shown a positive and statistically significant correlation between company financial outperformance and diversity, on the dimensions of both gender and ethnicity and this business case continues to strengthen.   With 365 large US and UK based companies in their data set since 2014, the 2019 analysis finds that companies in the top quartile for gender diversity on executive teams were 25 percent more likely to have above-average profitability than companies in the fourth quartile—up from 21 percent in 2017 and 15 percent in 2014. In the case of ethnic and cultural diversity, the business-case findings are even more compelling: in 2019, top-quartile companies outperformed those in the fourth one by 36 percent in profitability, slightly up from 33 percent in 2017 and 35 percent in 2014. Considering both gender and ethnicity, bottom quartile companies on both dimensions were 27 percent more likely to underperform than all other firms in the data set.

Yet progress, overall, has been slow. In the companies in Mckinsey’s 2014 data set, based in the US and in the UK, female representation on executive teams rose from 15 percent in 2014 to 20 percent in 2019.  Similarly, the representation of ethnic minorities on UK and US executive teams stood at only 13 percent in 2019, up from just 7 percent in 2014.  Even more strikingly, beyond average statistics, zero non-majority representation in their executive teams in the United States is 31 percent and in the United Kingdom, it is a staggering 58 percent!

Whilst we must not underestimate the significance of the progress that has been made thus far, there is no doubt that more still need to be done in Corporate Britain to continue on its D&I journey.