Vince Cable plans to reduce white dominance of boardrooms

Vince CableBusiness secretary Vince Cable is to launch an ambitious plan next month to bring more ethnic minorities into Britain’s most powerful boardrooms, with the aim of eventually having one in every five directors from a non-white background.

The move to advance more black, Asian and other minority representation into senior management roles comes after a successful push to get more women into director positions in large corporations.

Under the plans from Cable, one in five directors of FTSE 100 companies will come from an ethnic minority within five years. It is expected that he will announce the target next month.

The business secretary has consulted with Trevor Phillips , the former chair of the equality and human rights commission and the actor Lenny Henry, to formulate a plan to increase ethnic diversity at board level.

A study of the top 10,000 executives published this year – written by Phillips and Professor Richard Webber, of Kings College London – found that more than half of FTSE 100 firms had no non-whites at board level, and two-thirds had no full-time minority executive directors.

On Wednesday, the government will publish a six-month progress report on the number of women in Britain’s boardrooms. This follows a review by Lord Davies into women in senior positions which began in 2011 and was required by the government to improve female numbers in senior business roles.

Davies set a target of increasing board membership of women to 25% in FTSE 100 companies by 2015. Having started at 12.5%, it stood at 22% in September. The commodity trader Glencore became the final FTSE 100 to appoint at least one woman to its board when Patrice Merrin became a non-executive director in June.

A source close to the business secretary said yesterday: “Vince Cable wanted to encourage a more diverse workforce and the obvious place to start was with women. He thinks businesses make better judgments when they have a diversity of opinions at the top. We feel like we have achieved a huge amount in terms of women and boards, but if you look at diversity in terms of ethnic minorities there is a huge amount of work to do.

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“If we thought the problem in terms of female representation was bad, the problem with visible ethnic minorities is potentially even worse because you can count on one hand the number of visible ethnic minority heads of business or people on boards of FTSE companies.”

However, as with the drive for greater female representation on boards, the one-in-five benchmark will represent a target and not a legally binding quota. One of the initiatives that will be promoted in the plan by Cable will be to have a mentoring programme within the corporate structure to enable employees from ethnic minorities to rise through the ranks, according to the Sunday Times. The initiative may later be rolled out to include FTSE 250 businesses.

The move was welcomed by the Institute of Directors. “We have long advocated boardroom diversity, including a broad range of expertise, backgrounds, age, gender and skill sets. Forward-looking businesses recognise the benefits of pursuing this. Where, as with mining companies, an entire sector has historically appointed directors from too narrow a social pool, shareholders are forcing change in the interests of better business. Voluntary efforts to improve gender diversity are proving effective, and this is the model to follow in other areas,” said Simon Walker, IoD director general.

“Skills, business expertise and the climate for progress all need to be doggedly improved across the whole community. This work may be frustratingly slow at times, but ultimately a well-developed pipeline of diverse talent, in all its forms, is the only lasting solution.”

If the moves prove successful, it will result in a proportionately larger number of non-white people on boards compared with the current profile of the population. The 2011 census showed 86% of the population of England and Wales was white while the largest ethnic grouping was Asian or British Asian at 7.5%. The source close to Cable said the rapid growth in ethnic minorities meant those proportions were expected to change significantly within five years.

The report by Phillips and Webber was followed by further research from the charity Business in the Community which found 6% of senior management positions were held by people from ethnic minorities. The charity’s report found 7.9% of management positions were held by black, Asian and minority ethnic people in 2012, compared with 10% in total employment in the UK. The management figures have edged up from 5.5% and 6.8% respectively since 2007. The BITC report called for ethnicity to be added to the UK corporate governance code, which sets out standards of good practice and states: “The search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender.”

In terms of public profile, Tidjane Thiam of Prudential is one of the most high recognised senior executives from an ethnic minority. He was the first black chief executive of a FTSE 100 company and has served as a government minister in the Ivory Coast, where he was born.

First Published in the Guardian

Racial Diversity Neglected by Top British Firms, Warns Vince Cable

Vince Cable has accused the UK’s top companies of neglecting racial diversity in its boardrooms and urged business to use a wider talent pool when making senior appointments.

His comments came as the business secretary unveiled the latest statistics on women in the boardroom, which revealed that 20.7% of FTSE 100 directors are female, up from 12.5% in 2011.

Cable said: “I can think of very few black people at the top end of British business. What we’ve been doing with gender is right, but diversity is more than that. The area is neglected. It needs serious consideration.”

More than half of FTSE 100 companies have no non-white directors and two-thirds have no full-time minority executives at board level, a study found.

The study – by Trevor Phillips, former equalities commission chairman, and Richard Webber, of King’s College London – said UK competitiveness was put at risk by a lack of diversity in senior corporate roles, with just a dozen women occupying the 289 posts of chairman, chief executive and finance director in the FTSE 100.

In 2011, Lord Davies, ex-boss of Standard Chartered bank, was tasked by the government with improving the numbers of women in senior business roles and set FTSE 100 companies the goal of increasing female board membership to 25% by 2015.

The next biggest 250 companies were also encouraged to employ more female directors. Women account for only 15.6% of FTSE 250 directors and there are 48 boards comprising exclusively men.

The rise in the number of female directors is driven by the appointment of non-executives, rather than more women being hired as executive directors. Davies says only 6.9% of executive directors are female, up from 5.8% last year.

Even so, the campaign has been viewed as a success, especially as the rise in female directors has strengthened the UK’s argument against the imposition of compulsory quotas from the EU, and Davies committee members are now talking of a “final push to get over the finish line”.

Cranfield University, which provides the analysis underpinning the report, recommended five ways FTSE 100 companies could hire the 48 female directors needed to hit the 25% target, including pushing out board members after nine years in the same role.

Susan Vinnicombe, a Cranford professor who sits on the Davies steering committee, said: “There are 82 non-executive directors in the FTSE 100 who have held seats for more than nine years. The challenge for chairmen is to review this.”

John Heaps, of the law firm Eversheds, said: “Progress is still not translated into a ‘business as usual’ state where all candidates, whatever their gender, are assessed on equal terms. It is that residual bias that now requires attention.”

The release of the Davies report coincided with Thomas Cook making its own contribution to the improving statistics by appointing Annet Aris as an independent non-executive director.

Thomas Cook’s chairman, Frank Meysman, said: “We recognise the benefits of diversity and with Annet’s appointment the board comprises four women and five men, of which four are based in the UK, three in continental Europe, one in Turkey and one in the US, who have a broad range of skills and experience that are relevant to our business.”