FTSE 350 companies face ethnic diversity scrutiny by investors as female

FTSE 350 companies are set to face more pressure by investment managers to boost ethnic diversity at the top, while female representation has reached early targets set by the government.

However, small caps are expected to fall behind as only 20% of AIM UK 50 directors are women.

READ: Norwegian wealth fund pushes for more gender diversity on portfolio companies’ boards

The Investment Association (IA) has announced it will issue an ‘amber-top’ to firms that do not disclose either the ethnic diversity on their board or a credible action plan to achieve the Parker Review targets, which require to have at least one director from an ethnic minority background by 2021.

In last year’s AGM season, 75% of FTSE 100 companies did not report the ethnic make-up of their boards.

“The UK’s boardrooms need to reflect the diversity of modern-day Britain,” said Andrew Ninian, a director at IA.

“Those [companies] who fail to do so this year will find themselves increasingly under investors’ spotlight.”

The IA is also seeking greater progress on gender diversity, so companies whose board comprise of 30% or less female directors will receive a ‘red-top’ – an increase on last year’s 20% threshold.

One thing to note – @InvAssoc appears, from its website, to have no ethnic diversity on its own Board. It might be an idea to do something about that if making similar demands of companies. /6 END #ESG #boarddiversity #responsiblebusiness

— ChukaUmunna (@ChukaUmunna) February 24, 2021

There were more positive news on this front on Wednesday, as the government-backed Hampton-Alexander review announced the FTSE 100 met the 33% target for women on boards at the beginning of 2020.

Women’s representation now stands at 36.2%, up from 27.7% in 2017. Back in 2015, Westminster set up the goal of all FTSE 350 boards having 33% female representation by 2020, which would bring 350 more women in top positions.

The changing face of business- 33% women on boards target met and significant progress on women in leadership.
Not a ‘job done’ but important to celebrate progress.@beisgovuk @GEOgovuk @KPMG @LBGplc @denisewilsonwh #ftsewomenleaders https://t.co/IUTxX0Uvmk

— Hampton-Alexander Review (@HA_Review) February 23, 2021

The recommendation came after FTSE 100 reached a milestone of 25% of board positions being filled by women set four years prior.

PLC () said on Wednesday it became the first blue-chip company to launch a ‘Race Action plan’ to increase Black representation in senior roles to align with the overall UK labour market.

Departing chief executive António Horta-Osório unveiled a new set of diversity initiatives for the bank, which includes a commitment to 50% women, 3% Black and 13% Black, Asian and minority ethnic (BAME) staff in senior roles by 2025.

Small-cap lag

Conversely, smaller companies are falling behind as female representation among AIM UK 50 directors increased only by 2% last year.

This shift is almost entirely driven by non-executive directors rather than executives, according to research by Link Group, while a staggering 96% of AIM UK 50 directors are white – in comparison, 11% of FTSE 100 directors are from BAME backgrounds.

“We must understand that the top FTSE 350 listed companies in the UK, who tend to dominate attention in the diversity debate, are not fully representative of UK corporate culture,” said Tracey Brady, managing director of Company Matters at Link Group.

“There are more than a thousand smaller listed companies on the main market and AIM indices and tens of thousands of private companies. They employ far more people between them than the top FTSE 350 companies and tend to be more domestically focused, meaning they reflect UK company leadership and the lived experience of the UK workforce much more than their very large, often global,…