Diversity amongst the boards of the UK’s smaller companies are still not good enough. So what can be done about it?
On Tuesday 16 February, Company Matters launched their second board diversity report along with a webcast to discuss the UK’s AIM and FTSE Small-Cap companies.
The report: what’s changed and what’s stayed the same?
Company Matters launched their first official report early in 2020, focussing on the diversity of Directors and the quality of disclosures on companies’ policies and practice to drive further diversity in the most recent annual reports of the AIM UK 50 and 100 largest Small-Cap companies.
Our second report – published 12 months on – looks at what has changed and what has stayed the same. The report focuses mainly on gender, ethnicity, age and tenure across both Executive and Non-Executive Directors, revealing some promising good practice but with many areas still needing to improve.
Our most recent diversity research reveals that 1 in 3 directors on FTSE Small-Cap boards that we looked at are female, a very significant year-on-year increase - meeting the Hampton Alexander target and showing that change is possible in a short time. But three quarters of the AIM market haven’t met the target with a small increase to just 20 per cent female representation, showing this market has a way to go.
In terms of ethnicity, those from Black, Asian and Minority Ethnic (BAME) backgrounds are still significantly under-represented at board level and the numbers aren’t changing quickly. 94 per cent of Small-Cap directors and 96% of AIM directors are white, showing no material year-on-year change. Furthermore, the quality of disclosure that companies are making on how they are approaching diversity and inclusion at the most senior levels of their organisation is not significantly improving – we continue to encourage companies to do more in this area.
Talking to Lord Bilimoria
Company Matters’ report shows that gender diversity is improving in some ways – but the figures plummet at senior executive level, with women continuing to make up less than 10% of executive positions.
Boardrooms should represent many people with different perspectives and experiences for the best possible decision-making. Mckinsey research reveals that the top quartile of companies with a diverse board are 36 per cent more profitable. Further, there are growing investor, regulatory and societal expectations on companies to ensure that opportunities are available for all, and that companies are engaging with stakeholders in a forthright way about the initiatives they have in place to create these opportunities. The first step is raising awareness of the issue and the next is making a plan to do something about it.
Lord Bilimoria believes in championing causes. He has first-hand experience of seeing companies flourish and grow from micro-size to nearly FTSE100, driven in part by a focus on diversity and inclusion, such as during his time on the Booker board. He’s also the first ethnically-diverse president of CBI.
The CBI’s Change the Race Ratio campaign
Nearly 100 companies have signed up to the CBI’s campaign, which is based on the Parker review targets for the FTSE100 and 250. Its four pillars are to encourage leadership, transparency, policy reporting and to highlight pay gaps – causes that Company Matters’ report aims to support.
Lord Bilimoria believes that a diverse board generates innovation, buzz and energy. This inspiration becomes aspiration, leading to achievement and circling back to inspiration. He also rightly reminds us that young people today care about diversity and inclusion; when they look for employers, it will be a key player in the choices they make.
It should remain on every company’s radar – not because they have to, but because they believe in it.
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