How can diversity decisions be made more black and white for businesses?

Published: November 20, 2014

“It needs to be demonstrated that diversity is right, and that it’s right for business.”

This week the Institute of Directors (IoD) hosted an event to debate the role of ethnic representation in UK boardrooms – or, to be more precise, the distinct lack of it.
The white, male preserve of the British boardroom finds itself under scrutiny on a number of fronts. Top of the agenda for some time now has been the shortage of women in executive positions; only 12% in the UK according to Grant Thornton’s last Women in Business report. Last year another client project, this time with diversity specialist Equal Approach, showed that social class was also in serious imbalance within UKPLC. With half of FTSE 100 businesses having no black and minority ethnic (BME) representation, the topic of ethnic diversity is beginning to receive greater, and overdue, attention.
Dr. Vince Cable recently suggested that one-in-five seats in UK blue-chip companies should be occupied by people from a BME background. He bases this on the reasonable expectation that by 2020 this proportion will be of equal weighting to the overall population. The proposals have been criticised by institutions such as the CBI and even the IoD itself, citing the defence that businesses must be at liberty to recruit those who are best qualified for the ‘job’.
However, this is where many are missing a core element of the argument. Clearly there is a moral imperative to create equal opportunity and to broadly match the composition of organisations such as businesses and government with the overall composition of the UK as a whole. It’s the right thing to do. But this in itself is not always the best driver for boards. The ‘job’ for board members is to generate the best return for shareholders. And it is pressure from these stakeholders that will drive change. For this reason the debate and communications around recruitment must include focus on board and company performance.
There are credible reports that show diversity in the boardroom generates better decision making and better returns than those without diversity. McKinsey produced a pivotal report showing that gender balance led to better performance and research from the National University of Singapore illustrates that boards comprising both genders, at least two ethnic groups and two generations, produced an average return on assets of 5.1% compared to just 1.1% for boards that had no diversity. Their report is aptly called, ‘The Diversity Dividend’.
It is precisely this evidence driven approach that is needed when communicating with boards and the shareholders they are answerable to. It needs to be demonstrated that diversity is right, and that it’s right for business.

Keith Brookbank
Director

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