Investors demand greater transparency on ethnic diversity on boards
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Investment managers are calling on some of the UK’s biggest firms to be more transparent about the ethnic diversity of their boards.
Almost three-quarters of FTSE 100 firms failed to report the ethnic make-up of their boards in this year’s AGM season, according to data from the Investment Association (IA).
Some 37 FTSE 100 companies had no Black, Asian or minority ethnic (BAME) directors in February according to the Parker Review – a government-sponsored body set up to monitor the ethnic diversity of UK boardrooms.
The IA has said that the lack of transparency is preventing investors from holding companies to account on their progress.
“The Parker Review from earlier this year showed there is still significant progress to be made on improving the ethnic diversity of UK PLC boards and investors need more information to assess a company’s journey to meeting the Parker Review target”, said IA chief Chris Cummings. “Transparency is key.”
It comes after institutional investor Legal & General this week issued an ultimatum to firms this week over their lack of diversity.
L&G told FTSE 100 firms with all-white boards that it will vote against them if they do not hire a BAME director by 2022.
L&G, which manages over £1.2 trillion of assets, is thought to be the first big UK investor to threaten to vote against companies that fail to take action on director diversity.
It echoed a call from the Confederation of British Industry (CBI) last week that the biggest British companies should have at least one BAME member on their boards by 2021.
The industry group said research from Mckinsey showed that more diverse companies were likely to be more profitable than their peers.
There has been some progress on gender diversity, with the FTSE 350 now meeting the 33 per cent gender diversity target set by the Hampton-Alexander Review.
The number of “one and done” boards, those with just one female director, in the FTSE 350 has dropped from 74 at the end of 2018 to 16 this year.