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Linklaters

Don’t overlook the real meaning of the Parker review

There is currently woeful underrepresentation of ethnic minorities on company boards. Companies should not just “tick the box” to redress this imbalance, because it is in their best interests to find, nurture and promote the best talent from across society.

In October last, the final version of the review led by Sir John Parker, “Beyond One by ’21: A Report into the Ethnic Diversity of UK Boards” was published. Even applying the broad definition of “ethnic minority” that the Parker review used, the statistics were stark – only 2% of all board directors were UK citizens with an ethnic minority background, more than 50% of the FTSE 100 company boards had no ethnic minority representation, and seven of the FTSE 100 accounted for over 40% of the identified ethnic minority board population. The report recommended that FTSE 100 Boards should have at least one director of colour by 2021, extended to 2024 for FTSE 250 Boards. Its recommendations heralded a mixture of sentiments, ranging from “not another checklist”, to ashamed confirmation of an overlooked truth, to the welcomed identification of a challenge to UK businesses enabling them to push forward even further.

Linklaters’ partner Tom Shropshire was a member of the Parker review and a key draftsperson. Here we give a perspective that goes beyond the conclusions of the review.

While never expected to have the “game-changing” impact that the Davis review into gender diversity had, the Parker review has allowed the conversation to move beyond gender. Fundamentally Parker, as with other reviews, has an undeniable business logic: to reflect their customers and to be ready for future challenges, organisations need to embrace diversity, equality and inclusion.

So the real question is what does that mean for boards and executives who are attempting to address the challenges put forward by the various reviews on gender and diversity, including Parker?

Parker has moved the debate beyond a focus on gender and has opened the door to the broader questions about the need for a diverse workforce and management team.

How to not “tick the box”

Your organisation’s approach to diversity must reflect its corporate priorities, strategy and ambitions, first and foremost. The proposition that success depends on talent is not controversial, so too it should be uncontroversial for companies to remain open to all avenues and opportunities to find, train and promote the best talent, wherever that talent may be and whoever may have it (or the potential for it).

Parker makes it harder for companies to tick the box on diversity not because there aren’t any qualified candidates out there – that argument was dispelled by the review – but because it has moved the debate beyond a focus on gender and has opened the door to the broader questions about the need for a diverse workforce and management team.

With all of that in mind, here are our thoughts on how to seek, build, develop and promote ethnic diversity beyond Parker’s recommendations:

1

Revisit your diversity policies in light of your corporate strategy.

They need to be aligned and support the direction of the company. The diversity policy needs to ensure that inclusion is at its core, as a diverse population will then have a place to reside and grow. Ensure that your policies include ethnicity and emphasise the need for ethnic diversity and experience, culture and thought within your organisations. Also make sure that your policy is revisited regularly.

2

Gain endorsement by the board, the Chair and the senior executives.

Leadership has to embrace diversity, including ethnicity, openly and transparently. Leaders must “walk the walk” and ensure that the culture within the organisation truly accepts diverse thought. That is harder than it seems as leading diverse teams is a huge challenge. You may want to suggest outside training on leading diverse teams – which is distinct from anti-bias training. Reverse mentoring may also be helpful.

3

Revisit promotion and hiring criteria.

This should be done both internally and externally. Internally, each of the job positions and qualification criteria should be examined for any inadvertent or implicit bias. Companies may want to look back at the applicant pools for its positions as there can be indicators of implicit or explicit bias. Externally – with the use of executive search – be clear in your terms of reference that they are to help achieve your strategic ambitions, including helping you to build a diverse team from top to bottom.

4

Challenge where a “long” or “short” list does not reflect diversity.

Not just based on gender, but also ethnicity. There is also a need to look beyond any specific appointment, and really assess the pipeline of talent. Beyond this person, for example, “Where are the next potential candidates?” Certainly, if diverse candidates aren’t in your pipeline and you aren’t developing them, progress will be slow or non-existent.

5

Consider specific targets throughout all ranks of the organisation, and commit to them publicly.

Don’t boil the ocean, be pragmatic and realistic about first steps, but be clear and committed to the ambition. The pace of change is important and will be a measure of commitment. Targets and milestones can be helpful and powerful if thoughtfully applied, and focus on all stages of progression, not just in the senior ranks.

In summary, issues for boards to consider

One

Does your diversity policy ensure that inclusion is at its core so that a diverse population will have a place to reside and grow?

Two

Does the board “walk the walk” i.e. does it embrace diversity, including ethnicity, openly and transparently?

Three

Promotion and hiring criteria need to be revisited regularly.

Four

Parker is not just about board positions. Companies need to help create a pipeline of good diverse talent if progress is to be achieved. If diverse candidates are not in your pipeline, and you are not developing them, progress will be slow or non-existent.

Five

Thought should be given to specifying targets and committing to them publicly. What gets measured tends to get done.

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