The Parker Review: Progress and challenges for ethnic diversity in UK boardrooms

The latest Parker Review shows encouraging progress on boardroom diversity for ethnic minorities, with 70 per cent of the FTSE250 now meeting the core target of having at least one minority ethnic director on their boards.

The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

But the review recognises that there is still more work to be done to increase ethnic minority representation at a senior management level.

Whilst the review is encouraged by the progress made, it acknowledges the challenges that hinder the advancement of ethnic minorities at a senior level, including unconscious bias and lack of available role models. It also finds that the top two reasons holding leaders back in making further progress are “the fear of making inappropriate statements” and “the fear of being labelled racist”. Whilst these might be genuine factors impacting progress, we must also recognise the limitations placed on employers to take lawful positive action under the UK’s anti-discrimination legal framework.

The assumption that well intentioned measures designed to drive progress on diversity will be lawful has never been a safe assumption. As challenges of positive discrimination become better known and more prevalent in the current environment, understanding the often-blurred line between lawful positive action and unlawful positive discrimination has become ever more important. 

Targets, like those set by the Parker Review, can be an effective tool to drive forward short-term progress on diversity. But targets can also carry greater legal risk. While the setting of targets themselves is not unlawful, the measures firms take to achieve them can be if targets are treated as quotas rather than aspirational goals.

As an alternative, or in addition to targets, many organisations adopt a sponsorship model, where senior leaders actively support and advocate for the career progression of high-potential ethnic minority employees. Whilst these are not new concepts and are widely used practices to improve diversity and equity in a corporate setting, there is potential legal risk of positive discrimination if they become standard pathways to promotion or success.

Legal and regulatory change is afoot in this space. The financial regulators have proposed new regulation for in-scope firms which would, if enacted, shift the dial on reporting and governance on diversity and inclusion to a scale we have not seen before, and if they make it into government, Labour has promised to mandate ethnicity pay gap reporting – something which the current government has confirmed it will not introduce in the short-term – and introduce a new Race Equality Act enabling ethnic minority employees, along with disabled workers, to bring equal pay claims. Whilst many of these developments are at the proposal stage, business leaders would be wise to keep up to date with the evolving legal landscape and the increasing regulatory expectations for firms to prioritise diversity, equity, and inclusion.

The latest Parker Review was published two weeks’ following the latest FTSE Women Leaders Review. Like the Parker Review, it also paints a positive overall picture for progress in achieving gender boardroom diversity but found little change to the number of female CEOs and insufficient progress at a senior level below the board. 

The focus over the next few years will clearly be on improving diversity across the senior leadership population, for both listed and large private companies. But achieving progress at this level brings nuanced challenges, including the tenure of these roles compared to board positions, and the availability of diverse talent coming through the ranks. 

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