The recent surge of protests and demonstrations striving for racial equality has led to questions about ethnic diversity in the workplace. Matt Hancock, Secretary of State for Health and Social Care, was recently questioned about equal representation in the cabinet, and many companies have issued public statements about the need to review and improve their current approaches to ethnic diversity. 

While it is clear that diversity is of interest to the wider stakeholders of a company, diversity in the workforce and at board level can bring benefits to the company itself. Increasing diversity on the board brings a greater range of backgrounds, perspectives and experiences to the board, likely to improve debates and decision making. Additionally, it will ensure that the board is representative of society, including their customers, employees and wider stakeholders. By doing so, they increase the likelihood of being able to understand and address the needs and interests of those stakeholders.

Corporate reporting is often used to try and encourage companies to adopt certain attitudes and focuses. For example, the viability statement in the UK Corporate Governance Code was introduced to encourage long-term thinking in board discussions. It is possible that corporate reporting could be used to encourage greater focus and attention on diversity.

Currently, the focus is heavily on gender in its reporting on diversity, neglecting to discuss any other types of diversity in detail. The focus on gender diversity over others is likely due to two reasons. There is a requirement to report on gender diversity for Main Market companies, both in the required disclosures of the Companies Act and in the UK Corporate Governance Code. This assures that gender diversity will be given a level of attention within corporate reporting. The other reason is the prominence of the reports and findings from the reviews that were undertaken on behalf of the UK Government examining gender diversity at board level. These were widely discussed in annual reports and led to large improvements in the gender diversity seen at listed companies. The first review, the Davies Review, led to an increase in the percentage of women on FTSE 100 boards from 12% to 25%. The current target, recommended by both the Davies Review and the Hampton-Alexander Review, is to have 33% of women on boards at FTSE 250 companies by the end of 2020.

It seems that, in order to see an improvement in ethnic diversity, similar steps will need to be taken. The Parker Review, which was undertaken on behalf of the UK Government into ethnic diversity, released a report in 2017 and found that at the end of July 2017, only 85 of the 1,050 director positions in the FTSE 100 are held by people from ethnic minorities. The Parker Review set a target of at least one director from an ethnic minority background on FTSE 100 boards by 2021 and on FTSE 350 boards by 2024. An update on the Parker Review in 2020 showed that, out of the companies that responded to the survey given by the Parker Review, 37% of FTSE 100 companies and 69% of FTSE 250 companies did not meet the targets outlined. There is still a long way to go to meet these targets.

In terms of required disclosures for ethnic diversity, there is not a specific disclosure for this now. The UK Corporate Governance Code (2018) asks for a diversity policy with objectives and targets, and, hopefully, this will lead to greater disclosure and reporting. However, it is likely that more specific disclosure requirements will be needed to bring greater focus on ethnic diversity.

For help with communicating your diversity disclosures and wider corporate communications, please get in touch.

Keep up to date

Our latest opinions