Government needs to help push open boardroom doors to BAME talent

I welcome Vince Cable’s article in the London Evening Standard yesterday on the need for more ethnic diversity in Britain’s FTSE-100 boardrooms.

This is long overdue. British businesses are missing out on diverse talent that could take their companies, and the economy, forward.

In an increasingly competitive global economy we cannot afford to waste the talent that exists in BAME communities.

In the article Vince, and Labour’s former shadow business secretary Chuka Umunna, state:

The ethnic diversity of our boards has gone into reverse. The latest survey by executive recruiter Green Park of 10,000 top business leaders shows the number of visible ethnic minority CEOs is falling and the number of all-white boards is increasing. Yet 14 per cent of the population is from a black or minority ethnic background. Today there are just four non-white CEOs of FTSE-100 companies following the departure of Tidjane Thiam from Prudential earlier this year.

They call on Lord Mervyn Davies, whose gender employment paper is published today, to start a new review into BME under-representation in the FTSE-100 company boardrooms.

The Race to the top study noted that, even though the percentage of BME directors on FTSE-100 boards was extremely low (4.7%), it was “heavily dependent on the recruitment of ethnic minority directors from overseas.”

In a wider, context the Labour Force survey found the gap between the total BAME population, and the percentage of BAME people in management positions, had widened slightly between 2000 and 2015.

As well as employment there is also a pay gap. A study by the University of Essex in 2012 found that “in 1993 white people earned an average of 18p an hour more than non-whites, but by 2008 the gap had risen to 43p an hour. This was around 7.5% of the minimum wage for those over 21 in 2008, or 3.6% of median hourly earnings… Britain’s white workers are paid more than ethnic minorities and the hourly pay gap has more than doubled in the 15 years to 2008.”

In a foreword to a 2003 Cabinet Office paper called ‘Ethnic Minorities and the Labour Market’, Tony Blair wrote: “The report sets out the goal that, in ten years’ time, ethnic minority groups should no longer face disproportionate barriers to accessing and realising opportunities for achievement in the labour market. I believe that this is a demanding goal but an achievable and crucial one if we are to build a more inclusive country in which everyone can realise their full potential.”

13 years on there is little evidence that the ‘ethnic penalty’, in employment rates and the pay gap, will be eliminated without concerted action from Government.

The Business Commission in 2009 recommended that the Government should assess in 2012 whether the private sector has made progress in reducing the BAME employment gap. That review is yet to take place.

The Conservatives currently have a ‘20/20’ target to increase BAME employment by 20 percent by 2020. This is a laudable aim at first sight, but it lacks benchmarking. As a result this is not a commitment to tackle disproportionate disadvantage. If overall employment rises by 30 percent and BAME employment by 20 percent, the Government will have fulfilled its’ promise while the gap between BAME and white people will have widened.

The Lib Dem Race Equality Taskforce report in 2013, of which I was a member, noted that the Government have adopted the policy ambition of eradicating the BAME employment gap within 25 years. With real political will and commitment this can be achieved.

The race equality think tank the Runnymede Trust, who I work for, published a study called Snowy Peaks into FTSE-100 companies in 2013. It made a number of recommendations for ways forward, including ‘high potential’ graduate programmes.

I hope that Vince and Chuka’s call for action is taken seriously because this issue has been the subject of many a report for many years. Runnymede first looked at FTSE-100 companies in 2002 and found little appetite for change in the boardrooms, despite America showing that diverse boardrooms add value.

It is clear that Britain’s biggest companies cannot be left to their own devices; decades of inaction mean Government need to use their influence to open the doors of opportunity to BAME talent.

* Lester Holloway is a former councillor and member of the Equalities Policy Working Group, and a member of the Race Equality Taskforce

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18 Comments

  • “Government need to use their influence to open the doors” how. most large company boards consider politicians to be something that is found under a stone.

  • David Evershed 29th Oct '15 - 4:18pm

    Business owners, the shareholders, should choose their boardroom directors on merit.

  • I may have misunderstood David Evershed but he seems to be suggesting that Government and we as a party should take no action because shareholders already choose their boardroom directors on merit.
    The problem is that they don’t. As with female representation on boards and in the party, there is unconscious bias against people who look and sound different from existing members. After waiting generations for equality of opportunity I believe that in both cases the only way to achieve an even playing field is to bring in women and BAME only selection and to introduce quotas.
    I know some Lib Dems see this as a discrimination equal to that which has operated for years against women and BAME candidates but, for me, this positive discrimination only needs to be operated for a fixed amount of time until there are sufficient numbers to ensure that ,when recruiting, BAME and female candidates are not looked upon as interlopers.

  • Lester Holloway 29th Oct '15 - 6:01pm

    Well said @SueS. Selection on ‘merit’ has long been a fig leaf for justifying grossly unfair outcomes, both on gender and ethnicity. It implicitly assumes that self-replication tendencies, old boy networks and prejudice simply do not exist, and that rejected candidates simply weren’t up to the job. It’s a line that is in some ways incomparable with the belief that both genders and all races are equally likely to have talent.

    @Bruce – Regardless how business view politicians, politicians can set regulation. They can make the Equality Act apply to the private sector if they so wish. They can make rules on procurement so that all companies who bid for public contracts have to pass certain equalities thresholds. And they can help set the mood music on public debate around these issues, making the business case for equality more strongly in public.

  • Lester Holloway 29th Oct '15 - 6:02pm

    I mean ‘incompatible’ not incomparable!

  • Lester any company that does not select on merit is reducing its potential. When i was a cfo we had a head of sales who was female, as was our credit control head and customer service head. All were appointed on merit. our cfo was slightly physically disabled.

    The very large companies consider themselves above government ” They can make rules on procurement so that all companies who bid for public contracts have to pass certain equalities thresholds” and how do you assess equality. 50/50 board members? 50/50 staff. let’s start with Lockheed Martin, tell them you won’t buy their JSF35B without full equality.

    Before you have a go at industry start with the LIb Dems a shining example of equality, 19 national politicians of which 3 are women and all are white. 8 MPs all white and male. Then have a look at the other parties all white male leaders. How many of 19 are disabled.

  • Lester Holloway 29th Oct '15 - 8:55pm

    @Bruce – We agree that companies that do not select on merit are reducing their potential. But they do. That’s what the facts tell us. Vince Cable cited some figures, there are many more from a shelf-full of reports over two decades (I’m happy to provide a list). They all tell the same story; City boardrooms are disproportionately un-representative of society, in gender and ethnicity. The top UK companies executives are less representative of society than America (by some distance), Germany and Japan. If we accept – as I hope all Liberals do – talent and intelligence are distributed equally between all races and both genders – then it is clear that the City are missing out on diverse talent.
    I cannot comment on your own experience of appointing staff on merit. There are a lot of subtleties to this area. Unconscious bias is, by it’s nature, unconscious and therefore unrecognised. That can manifest not just in the sifting of CVs and interviews, but in where adverts are placed and what they say, whether the skills benchmarks have implicit biases within them and so on. I’ve long campaigned for equality and cannot say, hand on heart, that when I’ve hired it has been done entirely free of any unconscious bias, even if it is only as minor as the friendliness of the greeting before the interview. Studies have shown we instinctively feel more comfortable with people who look more like us. This can give rise to subtle feelings that applicants who do not may not ‘fit in’. Feelings about protecting a happy and relaxed office environment can also feed into the process. Scoring can be affected by influenced by the extent the interviewer is looking for confirmation of appropriateness or of problems. David Cameron spoke about the DWP study, initiated by Lib Dems, into the disadvantage that job seekers with foreign-sounding names suffer; ie. how many more applications they have to do to get an interview. These are facts.

  • Lester Holloway 29th Oct '15 - 8:55pm

    On the idea of Government telling Lockheed Martin they won’t place a contract without the company meeting equalities thresholds; well if we did have tougher procurement Lockheed Martin might well be upset at first. But if we have an atmosphere that not having women or BAME people at the top is ‘bad’ then such companies will naturally try harder and, over time, will not resent Government but see it alongside other business challenges they have to meet. I’ve long argued that procurement should not be one-dimensional, solely focussed on the bidding company, but should include incentives to sub-contract to more diverse firms to effectively earn ‘credits’ that offset their own shortcomings. As companies improve, Government can monitor progress and slowly raise the bar until we reach 50/50, or 14% in the case of BAME population.

  • Richard Underhill 29th Oct '15 - 9:20pm

    Please see today’s Financial Times.

  • ” City boardrooms” there are a lot more companies out there than just the city. “but should include incentives to sub-contract to more diverse firms” most companies aim to make a good product or provide a good service at a price which the customer is going to pay and with a profit margin to cover investment and provide a return to investors. Where subcontractors are used it is usually on the grounds of ability not diversity.

    I don’t what experience you have of manufacturing industry the priorities of any company are to produce a product or service while keeping the staff adequately paid and satisfied. Often it is impossible to obtain equality because no candidates apply. there are few female engineers most are extremely good so rarely on the job market. Specialist operating systems programmers are virtually unobtainable.
    I frequently have to explain to public sector employees and elected representatives that unlike the public sector where when money is needed you just raise more tax and run deficit budgets, the private sector has to run on a positive budget or it goes out of business.

    On another point how can a government and especially a liberal democrat party expect equality when its main politicians are 84% white and male.

  • What is all this white guilt about?

  • I think it would be helpful to study the ANC approach to this before seeking to push through recommendations.

    It is true that Non-Exec Boards are unrepresentative, but this article doesn’t ask if the proportion of qualified candidates is also unrepresentative (which it clearly is). We should put our focus on a society able to deliver that pipeline, rather than focus on putting a few token minorities on Boards who will be there by definition for tokenism only.

    The ANC has also gone down the route of scoring companies on diversity and adjusting govt procurement as a result. Rather unsurprisingly, this has been an invitation for corruption, clientelism and the creation of a new class of business-political appointees who have even further sucked wealth out of non-White communities.

    Let’s instead try to fix the childhood poverty, schooling, social mobility and aspiration gaps which are actually behind the issue. I’ve worked with a token minority on a Board before, and we do not want more people in that frustrating position.

  • Lester Holloway 30th Oct '15 - 2:35pm

    @Anne – can you explain what you mean by that?

  • Lester Holloway 30th Oct '15 - 2:47pm

    @Bruce – “Where subcontractors are used it is usually on the grounds of ability not diversity”… yes, and that needs to change. A lot of public money is going to sub-contractors who are completely undiverse. Diversity needs to exist right down the chain. The one exception is cleaners, where staff tend to be disproportionately BAME and often not subject to living wage.
    “Often it is impossible to obtain equality because no candidates apply.” Surely the basic rule of business is to create or seek demand. Why does this principle not apply to racial diversity? Why are questions not asked about why some sectors get less applications from BAME job seekers? Won’t it benefit companies to have more talent to choose from, rather than simply washing their hands of responsibility because ‘no candidates are applying’? The Stephen Lawrence Trust have done some great work encouraging young black people to become architects, a previously mostly-white club. They found that many youngsters had dreams of becoming one. As a result they are helping to change this profession for the better. Ken Livingstone previously worked with the construction industry (management) because only the labourers were diverse. Again, this helped to change the picture.

  • Lester Holloway 30th Oct '15 - 3:08pm

    @Peter – This notion that increased racial diversity is ‘tokenism’ is completely untrue. Whenever there is a focus on unrepresentative sectors you typically find bosses saying they agree and want to participate in moves to widen their talent pool. But often they don’t act alone so they need outside agents to provide that catalyst. That is the principle behind Lord Davies’ report into the gender deficit on FTSE-100 boards yesterday. My article was highlighting the call by Vince Cable to extend that same principle to BAME under-representation for the same reasons.

  • Lester Holloway 30th Oct '15 - 3:08pm

    @Peter – You mention the ANC. That example is not relevant to Britain because the first majority-black Government was faced with a black population that had been under-educated during the Apartheid era, and faced pressure to change the nature of power (business and state) after freedom. I think if South Africa tells us anything it is that swift action was risky for the economy but as a result 20 years later we see qualified and capable talent in charge in a way that wouldn’t be the case today if a more gradual approach had been adopted. But, as I say, very different dynamics to Britain. If the ANC are going to be compared to any other country it should be the US. There they brought in Affirmative Action in the 60s to ensure equal access to top education. By levelling the playing field at education it allowed new generations of African Americans to gain access to top earning positions on merit including being better represented on the boards of top corporations. Government action created a large black middle class that otherwise wouldn’t have existed not by forcing the private sector to open the door but by forcing universities to open the door to black students who then pushed open the corporate door themselves.
    Britain has different problems. Academic studies indicate that BAME achievement at schools and universities is rising. While access to Russell Group universities remains a big problem, projections show that overall on average BAME graduates are on course to overtake White graduates in the next decade. What studies also show is that this is not being translated into the world of work. Increased educational achievement is not making enough impact on employment. The qualified talent is coming on stream but not being hired. We see this in figures from the proportion of BAME young people gaining apprenticeships through to a fall in the proportion of BAME managers. Unlike the US, the primary problem is not with education but with the private sector.

  • Malcolm Todd 30th Oct '15 - 3:52pm

    Lester
    Thank you for one of the most interesting, clear and persuasive articles (and follow-up responses to comments) that I have ever seen on LDV.

  • Lester Holloway 30th Oct '15 - 7:45pm

    Thank you Malcolm!

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