The Parker Review has published its 2023 update report, “Improving the Ethnic Diversity of UK Business” (the Report). Notably, all FTSE 100 companies responded to the voluntary census with 224 of the FTSE 250 also responding. The Report highlights progress being made to diversify at top levels of business, which is vitally important given that it refers to 17% of the UK population belonging to ethnic minority groups.
The Report also sets new targets for FTSE 350 firms in terms of reporting statistics for senior management, as well as calling for data from the UK’s top 50 private companies, in line with the FTSE Women Leaders Review.
What is the review?
The Parker Review (the Review) is sponsored by Ernst & Young (EY) and was set up in 2015 as a government-backed review, led by business. It is now supported by the Department for Business and Trade. The Review was created to improve business performance by promoting diversity and to ensure equal opportunities for those who identify as belonging to an ethnic minority group.
The Review published its first report in 2017. Until this year, the Review had only set the target of having one ethnic minority board member by 2021 for FTSE 100 firms and the same for FTSE 250 firms by 2024.
As well as the findings, which we highlight below, the Report includes a number of recommendations for best practice on ethnicity self-identification, as well as case studies from EY, Tesco and Snap.
As of 31 December 2022:
- 96 out of 100 companies met the target of having one ethnic minority director, a percentage increase of 7% against the previous year;
- 49 of these companies exceeded the target;
- 178 ethnic minority directors in total, undertaking 190 director positions;
- six ethnic minority Chairs, seven ethnic minority CEOs, nine ethnic minority CFOs and nine other ethnic minority executive directors;
- 47% of ethnic minority directors were women – a decrease of 2% versus 2021; and
- 35% of ethnic minority directors were British citizens.
- 149 of the 224 companies that responded met the target of having one ethnic minority director, a percentage increase of 11% against the previous year;
- 28 of these companies exceeded that target;
- five ethnic minority Chairs, 14 ethnic minority CEOs, 10 ethnic minority CFOs and five other ethnic minority executive directors;
- 48% of ethnic minority directors were women;
- 56% of ethnic minority directors were British citizens.
The Report highlighted the board composition of investment trusts, noting that if their figures were not included in the analysis the percentage of companies reaching the target would rise by 8%. The Report cites contributing factors such as location (often outside mainland GB) and the tendency for investment trusts to have smaller boards.
FTSE 350 firms are now being asked to set themselves a target for the percentage of their senior management team who identify as being in an ethnic minority, with the aim to achieve that target by December 2027.
This year also sees a call for voluntary reporting from some private companies for the first time, namely from the top 50 of the largest UK private companies (by turnover and number of employees). Their suggested target is to have at least one ethnic minority director by December 2027 and to set their own target for senior management (as noted above for FTSE 350).
The Report provides reasoning for this expansion, including the effectiveness of these targets to date for the FTSE 350, the opportunity to share learnings and increased regulatory requirements. In particular, it notes that this year there is expected to be progress on the establishment of the Audit, Reporting and Governance Authority (ARGA). This will bring heightened regulatory oversight for companies with a turnover of at least £750 million or those with more than 750 employees, as they will fall under the definition of a “public interest entity” (PIE). The Report advises that this alignment meets responsibility principles as well as “the reality of coming regulatory change”.
The Report emphasises the importance of companies thinking of diversity as more than a box-ticking exercise at the recruitment stage, and instead considering it an opportunity to create “impactful talent management activity”. Businesses benefit when they take a proactive approach to implementing policies and procedures which promote diversity at all levels. This is vital given the heightened and growing scrutiny of company statistics in this area. The Report continues to show positive changes are being achieved, but that there is still a way to go.
If you have any questions on any of the points touched on in this blog, please reach out to a member of our team.