By Brian Collett — The UK government has been asked to compel fund managers to request the FTSE 100 companies in which they invest to detail their diversity policies and to say how they monitor the representation of black and ethnic minority employees on their staffs.
The call has come from Lady McGregor-Smith, a Conservative peer who became the only Asian female chief executive of a FTSE 250 company when she was promoted to the post at the outsourcing consultancy Mitie Group in 2007.
Her proposal results from her report, commissioned by the government, on the issues affecting black and ethnic minority groups in the workplace.
This in turn followed a study by Sir John Parker, chairman of the Anglo American mining company, which highlighted how few ethnic minority people were on company boards.
Parker’s report revealed that people of colour make up about 14 per cent of the country’s population but represent only 1.5 per cent of all business directors. More than half of FTSE 100 companies have all-white boards.
McGregor-Smith emphasised after her researches that employees should be able to identify with colleagues.
She recalled that a young black male apprentice told her: “How do you think I feel when I walk into the office every day? I relate to nobody, and they don’t relate to me.”
Another, an investment executive who found he was the only black delegate at a pension fund conference, observed: “When I moved to England I was startled. There were virtually no black people in the City.
“I have heard from a young black man who came into [an asset management] organisation, looked up at it, and said, ‘Is there a future for me here? I don’t see anyone who looks like me in the senior ranks.’
“If you are young, ambitious and black, who is your role model?”
McGregor-Smith responded: “For young people, [ethnic diversity] really matters. People need role models. If you look nothing like them and don’t have the same background, you don’t believe you will ever [advance].
“Every single organisation has to ask itself what it should do to ensure it is more equal and fair.
“Fund managers need to look closely at the make-up of the companies they are invested in. The investor community needs to look at this.”
She goes on to make a business case for improving workplace ethnic diversity. Her review estimated the UK economy would be £24bn ($31.7bn, €26.8bn) a year bigger if black and ethnic minority employees progressed as fast as their white colleagues.
Fund managers, she said, should do more to redress the balance.
Parker’s review, too, reached the conclusion that ethnic diversity made good business sense and recommended that the government should make sure there were no all-white boards in FTSE 100 companies by the end of 2020.
A voluntary system, however, fails to satisfy McGregor-Smith. She believes investment companies will run checks only if they become mandatory.
She reasons: “I’ve been staggered by how few [investors] want to talk about this. If an asset management company has no one of black and minority ethnic origin in it, why on earth would it ask the companies it invests in to improve? They are very removed from it.
“I just don’t see how this debate changes when you are talking about a sea of individuals with no understanding of different ethnic origins. That is why we need legislation.”
She may take comfort from the increase in the number of women now elevated to the boardroom. In 2011 the government said 25 per cent of FTSE 100 company directors should be female by 2015.
This proportion has been achieved, and a new target of 33 per cent by 2020 has been set.