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Ethnic DiversityEnrichingBusinessLeadershipAn update report from The Parker ReviewSir John ParkerThe Parker Review Committee5 February 2020Principal Sponsor

Members of the Steering CommitteeChair:Sir John Parker GBE, FREngCo-Chair: David TylerMembers: Dr Doyin AtewologunSanjay BhandariHelen Mahy CBESir Kenneth Olisa OBETrevor Phillips OBETom ShropshireYvonne Thompson CBEProfessor Susan Vinnicombe CBEMatthew PercivalArun Batra OBEBilal RajaKirstie WrightContentsForeword by Sir John Parker2Foreword by the Secretary of State6Message from EY8Vision and Mission Statement10Current Profile of FTSE 350 Boards14FRC/Cranfield Research on Ethnic Diversity Reporting36Parker Review Recommendations58Company Success Stories62Closing Word from Sir Jon Thompson65ObserversBiographies66Sanu de Lima, Itiola Durojaiye, Katie LeinweberDepartment for Business, Energy & Industrial StrategyAppendix — The Directors’ Resource Toolkit72Thanks to our contributors duringthe year and to this reportOliver CoverAlex DigginsNeil GolborneOrla PettigrewSonam PatelZaheer Ahmad MBERachel SadkaSimon FeekeSimon ManterfieldDr Manjari PrasharDr Fatima TreshLatika ShahKey advisors and contributors to this report:

Foreword bySir John ParkerLast month the United Kingdom embarked on a newjourney. Whatever your views about this venture,one thing is unarguable. In a world facing disruptionby novel technologies, unprecedented competitioninternationally, and demographic change at home,we will need to deploy every resource availableto us as a nation if we are to sustain the economicprosperity on which our people depend, andwhich maintains our public services, for example,our schools and the National Health Service.2At the heart of our success lies the performanceof our many great companies, many of them listedin the FTSE 100 and FTSE 250. There is no doubtthat one reason we have been able to punchabove our weight as a medium-sized country is thetalent and inventiveness of our business leadersand our skilled people. Many of our leaders haverisen from modest backgrounds. Despite thepopular image of big business, I am frequentlysurprised at the unlikely origins of many businessleaders – but I have come to believe that whilstthere may not be as many “weirdos and misfits”amongst us as some would like, a great variety ofbackgrounds on Boards is itself a commercial plus.I, for one, know that the Boards I have Chairedhave benefited from having a variety of voices,backgrounds and experiences represented aroundthe table. But my experience also tells me that intoday’s world, gender and ethnic diversity in ourBoards is a competitive advantage. And researchreport after research report supports this intuition.Add to this that there are now global expectationson Boards – not least from our shareholders andmany other stakeholders - to demonstrate thatour leadership is responding to and reflecting totheir changing customer base. As we pointed outin our first report, 75% of FTSE 100 revenues areearned outside of the UK, in markets which willinclude the nine countries, that will generate half ofthe world’s population growth between now and2050 – five of which are in Africa and three in Asia.The business imperatives which weoriginally set out could not be clearer:1. Greater alignment with our customerbase at home and overseas2. Recognising the changes and growing talentpool of ethnically diverse candidates in ourhome and overseas markets which will influencerecruitment patterns for years to comeWhilst we have made great strides in bringingfemale leaders into the boardroom, almost amajority of the Boards of our FTSE 100 companiesremain all-white domains. As one who started lifeas a student apprentice in shipbuilding myself,one thing is evident to me, this is the momentwhen industry needs every hand on the deck(as this report lays out). We really should not beleaving so many talented people marooned onthe dock side, without the chance to contribute.Three years ago, at the request and with thesupport of the then Government, we set ourselvesa challenge: to ensure that by the end of 2021, nomember of the FTSE 100 would lack a person ofcolour as a director. We also encouraged FTSE250 companies to meet this target by 2024.With less than two years to go to meet the firstof these targets, it might seem that we are wayoff course. However, our report suggests thatwhilst we may not yet be up to speed, it couldstill be possible to complete our journey in time.To start with, we should recall that in the previousand parallel drive to create greater genderdiversity on company Boards, led by Lord Davies,of which I was a Member, it took some time toget the wind in our sails. Yet we hit the targetof 25% within the five years we set ourselves.Second, we know from work done by the betterexecutive search consultancies that there aremany more qualified and competent peoplefrom minority backgrounds out there in the UKEthnic diversity enriching business leadership3

and Internationally than we often believe; wejust don’t meet them – and all too often ourhead-hunters aren’t introducing them to us.Third, the research conducted for this Reviewby Cranfield University for the FRC shows thatcompared to two years ago, many more companyBoards are at least talking about their deficitin leadership, and a significant number haveadopted positive policies. Most important asmall number have actually gone beyond justtalking about it; I am glad to say that 11 FTSE100 companies which had previously never hada person of colour on their Boards have nowmade appointments that take them out of theall-white era. And intriguingly, our data showsthat women of colour have, if anything slightlyoutpaced the men – though neither group is yetanywhere near being represented on FTSE 100Boards in the numbers that their talents deserve.Overall, I am encouraged that many of mycolleagues in the FTSE 100 have also declared anintent to act. Some have done so. But too manyof us, I fear, remain complacent that change willcome about naturally through the passage of time.Most of us know that this never works in any otheraspect of our businesses; and it won’t work here.In particular, our survey shows that there are alsotoo few people from ethnic minority backgroundsbeing prepared for elevation to Boards.Our pipeline is far from full, and the suspicionis that our company cultures are not activelyencouraging talented minority executivesand non-executives to choose roles in ourbusinesses when they feel they can leavecorporate life and do just as well as entrepreneurs,without some of the responsibilities.I want to be honest with my colleagues. I knowthat, even more than with gender, for everyChairman or CEO reading this report, this feels likedangerous territory. But we need to understandthat in today’s world, failure to act can be just asdamaging to our companies’ reputations, not tomention weakening shareholder and stakeholderconfidence. This is not just a matter of socialjustice. Many of those who invest in us and trustus as our customers are now monitoring ourperformance on leadership diversity, becausethey see it as a sign of whether we are truly readyto face up to the challenge of the modern world.4To many, our continuing lack of ethnic diversitylooks less like a failure on the part of minoritycommunities to produce competent candidates,and far more like a choice on the part of businessto settle for the familiar and traditional recruitmentprocesses. But no one doing the same thing,over and over again, brings about a differentresult. We, as company Chairmen and Chairsof Nominations Committees need to be moreassertive – not least by refusing to accept thehead-hunter’s excuse that “the candidates justaren’t there”. For my part, when I hear this messagefrom my consultants, my next step is to findbetter consultants who can find the talent eitherat home or in our world of 7.7 billion people.I am grateful to all those who have helpedwith this latest survey, in particular the teamsat Cranfield and in BEIS who have supportedour Steering Committee; and of course, themembers of the Steering Committee themselves.Associated with this report is the summary of theNational Equality Standard around which ourprincipal sponsor EY has developed frameworksand action plans as part of their work to assistcompanies create comprehensive diversity plans,these are worthy of discussion and study.I sincerely believe that, at a time when the UKneeds business to make a crucial contribution,and when public confidence in the marketeconomy is at best fragile, attaining our goalof “One by 21” is more than socially desirable.It is an essential element in our country’seconomic future, and the esteem in whichour companies are held around the world.We can and must act without further delay.Sir John Parker GBE, FREngEthnic diversity enriching business leadership5

I am grateful to Sir John Parker and his ReviewCommittee for their long-standing commitmentto improving ethnic diversity in UK businessleadership, and for all their efforts in producingthis excellent report alongside EY, CranfieldUniversity, the FRC and my colleagues at BEIS.I’m conscious that this is my first foreword for theParker Review as Secretary of State for BEIS, and Iwant to lay out my full, unreserved support for theParker Review’s work and ambition. Business in thiscountry simply will not be the best it can be untilit better represents the communities it serves.Foreword byThe Rt Hon AndreaLeadsom MPSecretary of State for Business,Energy & Industrial Strategy6I want to make the UK the best place in the worldto work and to grow a business. Workplacesthat are fair, inclusive and flexible are not onlyessential for good working practice - but forsuccess. Research shows that diverse businessesare the highest performing businesses. Andat this hugely exciting time in Britain’s history,we need to make sure that UK business aretapping into all the talent and skills availableat home and overseas more than ever, drivingbetter company performance and supportingour competitive advantage in the world.Three years on from the launch of the Parker Reviewreport and recommendations in 2017, this secondreport is an important stocktake on the progressbusiness has made against meeting the Review’skey recommendations on increasing the ethnicdiversity of UK Boards, developing candidates forthe Board pipeline, and enhancing transparencyand disclosure of company diversity policies.As the report highlights, attention paid withincompanies and by investors to business diversityand inclusion has grown, and there are some reallycommendable company initiatives on improvingethnic minority representation and supportinga diverse talent pipeline. However, we are nowless than two years off the first of these targetdates, and it is clear that not enough is beingdone by the FTSE100 as a whole to deliver.We know from the experience of the HamptonAlexander Review on FTSE Women Leadersthat measuring progress is a key driver toencouraging change, and I welcome theReview’s data gathering work over the last yearwhich my colleague, Minister Kelly Tolhurst,has supported so strongly. It is essential thatFTSE350 Boards continue to engage fullyand constructively with this exercise.I am committed to doing all I can to promotebusiness leadership diversity and inclusion. ThisGovernment backs business, and backs thebusiness community to do better. The businesscommunity must now pick up the challengesand recommendations of this Parker Reviewreport and drive the changes necessary toimproving ethnic diversity in UK Boards. Doingso will benefit our business and our economy.Andrea Leadsom MPThe Review set a target for each FTSE100 Boardto have at least one director of colour by 2021and for each FTSE250 Board to have the sameby 2024. This might sound unambitious, butat the time the Review began, 53 of our top100 companies didn’t have a single directorfrom an ethnic minority background.Ethnic diversity enriching business leadership7

We are pleased once again to be the principalsponsor to the Parker Review report, examiningthe progress that has been made on increasingethnic minority representation on Boards sincethe first Review was published in 2017. Whilethere has been some movement in reaching thetargets and recommendations set in the 2017report, overall progress among FTSE companieshas not been as expected. As of 31 December2019, 37% of companies surveyed in the FTSE100 and 69% of FTSE 250 have not met the targetof at least one ethnic minority director on theirBoard. The recommendations in today’s reportare vital to accelerate the pace of change.The volatility and complexity of business andsocietal issues in today’s world demands amore diverse Boardroom to help organisationsdrive successful outcomes for a wide range ofstakeholders. Given its importance to creating asustainable, high performing business, Diversityand Inclusiveness (D&I) needs to have its placepermanently on the Boardroom agenda.Messagefrom EYSteve Varley, EY UK Chairman8Like many of you, at EY, we see D&I as abusiness imperative and a key part of our futuregrowth. We believe that fostering diversetalent and building a strong pipeline of talentis a continuous journey. In 2013, our EY UK LLPBoard demographic was 11% female and had noethnic minority. I am proud that our Board nowconstitutes 60% female members and 10% ethnicminority. However, we are clear more needsto be done to increase diversity at all levels.The new recommendations outlined in today’sreport aim to help businesses do exactly that. Therecommendations are forward thinking and havethe potential to help businesses drive real changein the diversity of their Boards. Building a talentpipeline of high potential diverse leaders andsenior managers and pursuing an open approachto reporting on the diversity of your Board canhave a real impact on the long-term culture of yourbusiness. It is encouraging to note that the qualityof Board diversity policy reporting has increased,and businesses are moving in the right direction.Within EY, we have launched a new strategyto accelerate our approach and to prioritiseD&I to the same degree as any other businessobjective. We have increased our focus onachieving a significant shift in the makeup of ourpartnership; our commitment is to double theproportion of BME and female talent in the UKpartnership to 20% and 40% respectively byJuly 2025. As of 1 July 2019, the UK partnershipstands at 11% BME and 22% female - an increaseof 1% and 2% respectively since 2018. EY’s newpartner intake in the UK (over a three-year rollingaverage) has been 16% BME and 25% female.In addition to setting ambitious targets tohold us to account, we are also doublingour investment in targeted programmes forour high-performing BME and female talent,including our Future Leaders Programme,CareerWatch, Navigator and Accelerate@EY.I am also proud of our collaboration with othercompanies on these important issues, throughinitiatives such as the National Equality Standard.14% of the UK population is non-white and this isexpected to increase to 20% by 2030. To ensurebusinesses enable this pool of talent to thrive,alongside FTSE Boards, we are committed toimplementing the recommendations of this report.We will also continue to share our experienceswith the Parker Review Steering Committee andmaintain our work through the National EqualityStandard, to support other organisations.Steve VarleyEthnic diversity enriching business leadership9

1Vision andMissionStatementThree years. That is theamount of time thathas elapsed since thefirst publication of the“Report into the EthnicDiversity of UK Boards”by Sir John Parker andthe Parker ReviewSteering Committeeat the end of 2017.Less than two years is the amount of timeremaining for FTSE 100 companies torespond to the recommendations made bythe Parker Review Steering Committee.“One by ’21” seemed achievable in 2017, but as weenter 2020, while there are early signs of progress,the overall ambition looks very challenging.Just to remind us of what the Parker Reviewasked of corporate Britain, specifically FTSEcompanies – at least one (just one) non-whitedirector by 2021 for the FTSE 100, and at leastone non-white director by 2024 for the FTSE250. The Steering Committee also maderecommendations about developing the internalpipeline and asked for enhanced transparencyaround diversity policies and reporting.That was against a background at the end of2017 where over 50% of FTSE 100 Boardswere all white (51 to be exact), and wherethey were not all white, of the 85 total nonwhite individuals, about 20 were UK citizens(approximately 2% of the over 1,050 Boardseats). Seven companies accounted for 40% ofthe total (34 people) – meaning 93 companiesaccounted for the remaining 60% (51 people).These numbers were stark, and the need andcase for change was clear – at least to us. Basedon the latest information and nature of responsedetailed later in this document, we do notbelieve that sufficient progress has been made.At the time of the publication ofthe Final Report, we stated:10[W]e believe that in order for corporate Britainto reflect the progress that is being made indiversity, equality and inclusion generally,changes are needed in the Boardrooms whereleadership, stewardship and corporate ethicsare of utmost importance [S]uccessful companies will need to attract,retain and promote the best talent available,irrespective of nationality, gender, religion,ethnic background or any other perceiveddifference from the ‘mainstream’. It is clear thatin order to achieve this success, companiesmust reflect the values of their stakeholders(including employees, shareholders and thecommunities in which they sit) and also projectthose values externally (including to theconsumers they are seeking to attract and themarkets in which they operate).”Upon publication of the Report, while thereception was generally positive; however,there was also an exasperated voice audiblysaying, “yet another thing”. Refrains heard alltoo often were that it was “all just too hard”,and the “population was too small”, and thepeople were not “Board ready” and there wasa concern about “fit”. Unfortunately, over theintervening period, the Steering Committeehas become concerned that there are too fewpeople within corporate Britain prepared to seizethe opportunity to drive the corporate changewe sought to encourage and embrace a talentpool that is Board-ready and truly global.As individuals and as a Steering Committee, wehave continued to engage with a broad rangeof stakeholders to encourage this change, andto make the case for the commercial imperativebehind the Parker Review and the importancethat diversity in its broadest sense can bringinto the Boardroom and into an organisation.Ethnic diversity enriching business leadership11

We have experienced a fairly uniformacknowledgement of that, but to date, therehas been little evidence of action beyond thatacknowledgement – simply put, there is inertia.We have thought deeply about theseissues, and the source of them, and havetwo important observations to impart.The first is to suggest that there may be longstanding talent bias, and that there is little interestin or appreciation of the benefits that ethnicdiversity can bring into the Boardroom. Thesecond is to recognise that race and ethnicityare the most difficult things to talk about in theUnited Kingdom, for good and bad reasons– they are just too hard and too sensitive.In order to address the question of talent bias,we must first define what is meant. In this context,a talent bias refers to the institutional practicesthat have developed related to the identification,development and appointment of talent in theUnited Kingdom. For the avoidance of doubt, as aSteering Committee, we are not focusing on anysingle company or adviser, we are focused on thesystemic practices and approaches taken to date.At the core of the talent bias is the apparentlyinexorable logic of “that which has worked in thepast will continue to work in the future” – So whychange it? It follows, and has been evidencedsince the publication of the Parker Review, thatpeople in position to make change, have notyet. It is too risky – What if it all goes wrong?The Steering Committee strongly believes thatsuch a fear underestimates the breadth and depthof the available talent pool, and the benefits to begained. It suggests an unwillingness to be open,to be inclusive and to value diverse experiencesand perspectives. In fact, it could be be seen asnothing short of an admission that difference basedon race and ethnicity is not of sufficient value,and certainly not of the same value as experienceborne out of gender. As a Steering Committee, wecannot accept that as being underpinned by soundcommercial logic, fair to potential candidatesor indeed true. The value is in the differenceitself, and that is what must be understoodand appreciated more fully than it is today.Unless corporate Britain is willing to confront thatissue, well-trained, qualified people will continueto be overlooked by a system that has not beendesigned or trained to look for them, developtheir commercial acumen or understand thediversity of experience and thought they bring– let alone appreciate it and see it as valuable.12Of course, that pool of yet untapped talent needsto be met half-way by people on the other sidewho are willing to understand and appreciatethe talent that exists, and accept responsibilityfor driving change. It is clear to us that BoardChairs need to drive this change, and push pastthe institutional inertia that can exist where thereis a pre-existing talent bias. Board Chairs needto start by changing conversations, changingpractices, changing expectations, changingminds and ultimately changing organisations.The Parker Review asks them to be the agents ofchange and encourages them unreservedly.Turning to the second issue, there is a cleardiscomfort related to discussing race and ethnicityin the workplace – there is no avoiding it. Thisis particularly true where we as a society havebeen told not to notice the colour of a person’sskin and that race/ethnicity should not matter.While the Steering Committee understands wherethat has come from and why, we put forward theargument that to ignore or deny someone’s racialand ethnic identity is to ignore or deny them as afull person. It is no different than any of those otherfacets of human existence that make us who we areas individuals, each with value and significance.Therefore, if race and ethnicity is notacknowledged as important in its own right,there is little chance that an individual canbe fully understood or appreciated for thetotality of what they have to bring to the Boardtable. Acknowledgement, understanding,appreciation and ultimately respect are whatis needed, and never have any of those thingsbeen a source of discomfort. Our leaders,our Boards, our executives must learn to becomfortable talking about the way in whichrace and ethnicity may shape and informs aperson’s lived experience. We must recognisethat it is the experience which is important, andrace/ethnicity is a proxy – just as is gender.The Steering Committee believes that until thereis a true appreciation of the importance of raceand ethnicity to a person’s lived experience andwe can have a conversation based on mutualrespect and appreciation of difference basedupon it, the ability of UK Boardrooms to changewill be constrained. The question for corporateBritain is not about whether the non-white talentis there or ready, the question is whether it iswilling to appreciate it, attribute commercial andcompetitive value to it and change the historicalconstructs operating currently in the Boardroomand more broadly in our corporate institutions.Ultimately, the Steering Committee still firmlybelieves our recommendations continue tobe underpinned by strong industrial logic andwill enhance the ability of UK companies tobe competitive in the increasingly challengingand diverse British and global marketplaces.Therefore, for those that have not yet implementedthe recommendations, we strongly urge youseriously reflect on the views discussed hereand carefully consider your commitment todiversity, including in the form of race andethnicity, across your organisation. In addition,we ask that all stakeholders (including regulatorsand shareholders) take the steps they are ableto encourage or ensure that the Parker Reviewrecommendations be taken forward, includingthe achievement of (at least) “One by ‘21”.Without reservation, the Steering Committeethanks those Boards, Chairs and companiesthat have engaged with us and sought toembrace the recommendations – it is so veryimportant to exhibit how constructive changecan happen, and to highlight the lasting benefitsaccruing to those leading the charge.The Parker Review Steering CommitteeEthnic diversity enriching business leadership13

2Current Profileof FTSE 350 BoardsKey FindingsT his iteration of the Parker Review wasconducted through survey research of allFTSE 350 companies. Data presented istherefore self-reported by companies. As aresult of GDPR restrictions, we have changedthe mode of obtaining data from the previousmethod which involved imputing ethnicityclassifications from open sources. In additionwe have expanded the coverage beyond FTSE100 companies, to include the FTSE 250.The data obtained through survey responseshas enabled us to determine whether 256companies within the FTSE 350 have orhave not met the Parker Review target ofone director of colour on their Board.14Ethnic diversity enriching business leadership15

KeyFindings150companiesout of256companies (59%) did not meet the target ofhaving at least one director of colour on theirBoards, with less ethnic diversity observedon the Boards of FTSE 250 companies.FTSE 100FTSE 25031 of 83119 of 173companies (37%)did not meet the targetcompanies (69%)did not meet the target There were1721787.5%directors of colour inthe FTSE 350 holdingdirector positions.This amounts toof all FTSE 350 directorswhere we know theethnicity of the individuals.It amounts to 6.8% of all FTSE 350directors (including directors where ritish citizens whoBare directors of colourheld 61 Board postsacross the FTSE 350,representing 2.6% of all those directorswhere we know their ethnicity, and2.3% of all directors (including directorswhere we did not know their ethnicity). onsidering Board positionsCheld by directors of colour,across the FTSE 350,43% are held by females, comprising42% of director of colour positions inthe FTSE 100 and 45% of director ofcolour positions in the FTSE 250.we do not know their ethnicity).16 FTSE 100 FTSE 2509880directors of colourdirectors of colourin post, 11.3% out of directorsof known ethnicity, 9.7%when directors of unknownethnicity are included.in post, 5.3% out of directorsof known ethnicity, 5.0%when directors of unknownethnicity are included.These stats are based on data collected through surveys to the FTSE 350 and are self-reported. Theabove figures only take into account the responses received which had sufficient data to be able to tellif the company did or did not meet the target of having one or more director of colour on their Boards. here is a concentration ofTdirectors of colour in a smallnumber of companies.Eight companies account for nearly25% of the directors of colour. Across the FTSE 350,there are only 15 directors of colourfrom the survey respondents whooccupy positions of Chair or CEO.Ethnic diversity enriching business leadership17

Profile of CompaniesFTSE 350: Response Rates and Overall Findings1. The number of responses to the survey, andassociated response rate, are as follows:i. FTSE 350: 299 out of 350companies (85%).ii. FTSE 100: 96 out of 100companies (96%).iii. FTSE 250: 203 out of 250companies (81%). These response rates reflect a high levelof engagement with the Review, and inthe case of the FTSE 100, display almosta 100% response. Data was collectedbetween July 2019 and January 2020.It should be recognised that Boardcomposition may have changed sincethen and the publication of this report.2. 256 companies responded with sufficientdata to be able to disclose if they met or didnot meet the target of having one or moredirectors of colour on their Boards. Thiscomprised 83 companies from the FTSE100, and 173 companies in the FTSE 250.3. Across the FTSE 350 responses withsufficient data to determine if the targetwas met, 150 of the 256 companies (59%)did not meet the target, while 106 of these256 companies (41%) met the target.4. 1 companies did not respond to the survey.5This includes companies that only enteredthe FTSE 350 in October 2019. The October2019 lists of companies in the FTSE 100 andFTSE 250 are used throughout this report.Unfortunately, there was insufficient time tosurvey the companies new to the FTSE 350at that point. These companies are AirtelAfrica PLC, Finablr PLC, Foresight Solar FundLtd, Sirius Real Estate Ltd, Trainline PLC,and Watches of Switzerland Group PLC.5. It is unknown if 43 further companiesin the FTSE 350 met the target, as theyreported having no directors of colourbut categorised one or more of theirdirectors as ‘other’ or ‘prefer not to say’.16. There may be a social desirability effectin play; that is, companies being lesslikely to respond if they have not met thetarget. It is feasible therefore that up to244 companies in the FTSE 350 (70%)did not meet the target, when the 150known ‘not met’ firms are added to the51 companies who did not respond, andthe 43 other unknown companies.8. Although this suggests an improvementover time, non-responders and otherwiseunknown companies make comparisonsbetween years unreliable. If all suchcompanies have no directors of colour then48 of the FTSE 100 (the 31 who have notmet the target plus the 17 non-respondersor otherwise unknown companies) wouldnot have met the target. This

Principal Sponsor Ethnic Diversity Enriching Business Leadership An update report from The Parker Review Sir John Parker The Parker Review Committee

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