When Diversity isn’t Enough

Recent research on charities in England and Wales found that when looking at those from BAME backgrounds, the diversity on boards in the sector is less than FTSE Companies. Published by Inclusive Boards, the findings further outlined that out of 6,300 trustees, only 34% were female.  62% of the charities they reported on had all white boards. Imbalances were also discovered at the senior leadership level where almost 80% of senior leadership teams in the top 500 charities lack any ethnic minority professionals.

Many of you will be familiar with the several widely quoted reports such as ‘Women on Boards’ – by Lord Davies and ‘The Parker Review’ that called for there to be at least one person from a BAME background on the boards of FTSE 100 Companies by 2021. These reports are among many others that encourage us to consider gender, ethnicity and age diversity when recruiting board members, however, what this new research has found is that these reports are not necessarily filtering through to those other than for whom they are prescribed. In this way, we could deduce that rather than applying the ‘comply or explain’ or best practice approach that is usually implemented here in the UK, when it comes to board diversity we have adopted a more ‘rules-based’ approach such as that of the Sarbanes-Oxley rules that govern governance in the United States – with the notion being let’s just hit the target rather than address the wider issues.

How so I hear you ask? In the original 2011 report by Lord Davies regarding the number of women on FTSE boards, recommendations were made and a target set that 25% of those on boards should by female by 2015. In 2015, figures had risen to 26.1% from 12.2% in 2009. As a society, we should celebrate our progress but should also not allow ourselves to become complacent by just getting the numbers right. There are still issues with representation and also the balance of those who are appointed to help meet these targets. For example, only 2.9% of the 6,300 trustees on charity boards previously mentioned were women of colour.

In our 2016 Diversity in the Boardroom Supplement published by The Birmingham Post, we set the challenge to organisations across all sectors of looking beyond the FTSE to the thousands of other businesses that contribute to our economy to examine their practices and principles in relation to boardroom diversity. Reports on the issues of diversity in the boardroom have tended to focus on making changes at the top – appropriate in relation to the well-known saying that the fish rots from the head but we have focused so much on ensuring that the head isn’t rotten that the body has become neglected?

Improving diversity on boards is important, however, diversity by itself is not enough. Without acknowledging the need for competency and the right skills, recruitment of board members to hit targets or fulfill quotas will not result in the desired effect taking place – a competent board, will not be achieved. If the board is not competent, the organisation is exposed to the potential for failures which can, in some sectors have life changing consequences. The recent issues at Carillion have led to the loss of livelihoods, historical cases as Victoria Climbié and Mid-Staffordshire Hospital resulted in the tragic loss of lives, the unethical approach to employment law at Sports Direct led to reputational damage. The list could and unfortunately does go on.

Appointing individuals to your board just because they are female, young or from an ethnic minority is not a fail safe way of ensuring success, neither is it enough to appoint to keep up with appearances and hit targets because you don’t want to be the last in your sector to do so.

What the research released by Inclusive Boards has done is given us a window to connect the dots when it comes to our approach in getting the right mix of skills, competency and diversity on boards across boards in all sectors by showing us that there is still more work to be done. Credible solutions lie in the training and development of those coming through the pipeline, the education of those who have not typically been exposed to the world of boards and being able to develop their leadership capacity by gaining appointments and by us making a commitment to recruit in ways that are open and transparent for the benefit of generations to come.

In conjunction with GCA Partners, Karl will be delivering a new one day course called ‘Power and Influence in the Future Boardroom’. The course is designed for those who are on track to become the next non-executive directors, CEOs and industry leaders to help them to begin to think about not only making an impact in the boardroom, how to develop strategic thinking, being aware of the bigger picture and developing their capacity to be innovative but by also considering what the future boardroom will look like. As one of those individuals coming through the pipeline, this inspires me to consider how, when thinking about the future boardroom we can collectively ensure that this pipeline becomes dedicated to tackling the prevailing issues of a lack of competency and the sometimes woeful focus on hitting targets rather than changing inherent cultures.

Bringing this matter to a conclusion, consider these questions as a challenge to bring together the concepts of competence, diversity and the future boardroom in order to take steps forward to bring about real change. The first question and maybe the most telling would be: does it even matter to you that your board is not diverse for if this issue does not resonate with you, change is unlikely to take place.

Other questions to reflect on are:

How diverse is your board?
What steps will you take in the next 6 – 12 months to improve diversity on your board?
Is there a structured training and development schedule for your future leaders?
Have you considered the reach of the places where you currently advertise board member vacancies to encourage candidates from wider backgrounds with different experience to apply?
Who within your organisation can be targeted for pipeline development?
When did you last undertake an evaluation of skills on your board?
Have you considered cooption as a way to introduce diversity on your board?
Are you training your current and potential future board members?
In November 2018 we will publish our third Diversity in the Boardroom Supplement with the Birmingham Post. We invite you to take the Diversity in the Boardroom Pledge alongside a plethora of other organisations who have done so to demonstrate your commitment accepting the challenge… and then to do the work. We hope to be able to showcase how, across all sectors and on all types of boards we have made progress not only in addressing diversity but also in our commitment to make boards everywhere competent, committed and capable.

Liz Muir is a Governance Manager at the governance forum and an ambassador for the Diversity in the Boardroom Campaign

Places are still available for the ‘Power and Influence in the Future Boardroom’ course taking place on 17th May 2018 in Birmingham. Contact us on 0845 505 1875 or by email at admin@thegovernanceforum.com to book your place or places for your future leaders.

P.S. Please look out for more information about us updating our data protection policies where we will need you to respond to ensure you continue to receive Karl’s blog.