100 of the UK's top firms are supporting a drive to make the boards of FTSE-listed companies more inclusive by signing up to the Confederation of British Industry's (CBI) Change the Race Ratio campaign which aims to increase racial and ethnic participation in business.
The latest companies to pledge their support include security firm BAE Systems (BA.L), recruiter Bolton Associates, soft drinks maker Britvic (BVIC.L), transport operator First Group, real estate services and investment management company JLL (JLL), consultancy and construction firm Mace Group, professional services firm Miles Advisory, online payments company Paysafe (PSFE), and software company Sage (SGE.L).
When companies sign up to Change the Race Ratio they commit to taking action to set targets in order to increase racial and ethnic diversity among board members.
Signatories also promise to take action at ExCo and ExCo minus one levels to set "clear and stretching targets" and publish them within 12 months of making this commitment and aim to establish a separate target for black participation at both levels.
The campaign also pushes companies to be transparent on their actions — they must publish a clear action plan to achieve their targets and share progress in their annual report or on the company website as well as disclose ethnicity pay gaps within 2 years of joining.
Firms must also create an "inclusive culture in which talent from all diversities can thrive." The campaign calls on businesses to focus on recruitment and talent development processes to drive a more diverse pipeline, collect and analyse diversity data, foster safe, open and transparent dialogue with mentoring, support and sponsorship, and work with a more diverse set of suppliers and partners, including minority owned businesses.
The latest Parker Review report into ethnic diversity in UK Boards shows little progress has been made by businesses. More than a third (37%) of FTSE 100 and over two thirds (69%) of FTSE 250 companies surveyed still do not have any ethnic minority representation on their boards, according to Change the Race Ratio.
Diverse business leadership enhances profitability, with research from McKinsey showing that top quartile businesses of the most diverse executive teams are 36% more profitable than bottom quartile businesses.
Diversity also promotes greater innovation as employees who "think their organisation is committed to and supportive of diversity, and they feel included" found their ability to innovate increased by 83%, according to Deloitte.
Companies with diverse business leadership are also more likely to attract top talent, with 61% of women and 48% of men saying they assessed the diversity of a company’s leadership team when deciding to accept an offer in a survey by PWC.
Large investors are starting to act — Legal & General Investment Management (LGEN.L) said they will vote against FTSE chairs if their boards haven’t met the Parker ethnic diversity targets in 2022.
Lack of ethnic diversity in business also has a negative impact on economic growth, costing the UK £24bn ($32.6bn) a year in lost GDP, according to a McGregor-Smith review.