GREEN PARK DIVERSITY ANALYTICS:FTSE 100 “Top 20” Diversity Update

Introduction

This short paper provides key data on ethno-cultural diversity in the leadership of the FTSE 100 at Top 20 level – the combination of the Main Board and the Operating Board. It follows our previous report on diversity, The Green Park Leadership 10,000, published by Green Park Diversity Analytics in February 2014, which also included data on gender diversity and on the pipeline to the Top 20 level (known as the Top 100 level). We intend to publish a full update of that report in February 2015.

Since our February publication, greater attention has been paid to the issue of diversity on Main Boards. On gender diversity, many companies have made serious efforts to achieve the targets set by Lord Davies. Specifically, there are no longer any all-male FTSE 100 Main Boards.

It is clear, however, that there is more work to do to ensure that Main Boards and Operating Boards are truly calling on all the talent available to them. In particular, other analysts have produced research that shows that the performance of companies on the global stage is, in part, a function of their ethno-cultural diversity. The Financial Reporting Council has signaled that it expects greater transparency from companies on ethno-cultural diversity. And the Business Secretary has invited businesses to address the issue with the same seriousness they apply to gender diversity.

In order to support the launch of the 2020 Campaign, we have returned to our analysis to provide some headline findings on the current situation, particularly with regard to ethno-cultural diversity on company Main Boards and Operating Boards. Details of our methodology can be found in the appendix to this paper.

If you would like more information on the report, please contact us on +44 (0)207 399 4300.

Raj Tulsiani, CEO, Green Park Group

Trevor Phillips OBE, Chair, Green Park Diversity Analytics

executive search | interim management | business advisory | diversity analytics

✆ +44 (0)207 399 4300 | www.green-park.co.uk

December 2014

Company-by-Company Analysis

Our research shows that currently:

• 62 FTSE 100 companies have all-white Main Boards, a slight rise from 61 in February 2014.

• 69 FTSE 100 companies display an all-white leadership once Non-Executive Directors are discounted; neither their Executive Directors on the Main Board nor their Operating Boards include any non-white members. This is a rise from 65 in February 2014.

These results indicate that at the most senior levels of corporate governance, the FTSE 100 has become less ethno-culturally diverse than at the time of our previous survey.

We have deliberately not included the names of individual companies in this paper. We are keen to encourage voluntary action by companies, who will be aware of their own position.

Top 3 Level

The Top 3 level is an analysis of Chairs, Chief Executives and Chief Financial Officers.

This analysis of the current situation in the FTSE 100 is presented slightly differently to our February 2014 results, and is more detailed. However, the trends are clear; there are fewer minority Chairs (-1) and Chief Executives (-1), and just one additional minority Chief Financial Officer identified than ten months ago.

Table 1: Ethno-Cultural Origin of FTSE 100 Chairs

Origin Count

White 98

Black 1

Muslim 1

Hindu + Sikh 0

Chinese + Other Asian 0

Total 100

Table 2: Ethno-Cultural Origin of FTSE 100 Chief Executives

Origin Count

White 96

Black 2

Muslim 1

Hindu + Sikh 1

Chinese + Other Asian 0

Total 100

Table 3: Ethno-Cultural Origin of FTSE 100 Chief Financial Officers

Origin Count

White 95

Black 1

Muslim 1

Hindu + Sikh 1

Chinese + Other Asian 0

Total 98

Once more, strikingly, there is no representation of Chinese or other East Asian employees at this top level. We consider that there should be further study of the degree to which the FTSE 100 reflects the composition of the UK’s most important and fastest growing foreign markets.

Top 20 Level

The Top 20 level is an analysis of the Main Board and the Operating Board – the level below the Main Board. At this level we are presenting our results in a comparable fashion to February 2014.

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The results here are somewhat disappointing. This table shows that there has been very little overall movement in the diversity of the FTSE 100’s leadership, with the proportion of white Top 20 leaders declining only slightly from 94.8% to 93.6% - roughly equivalent to the addition of fewer than 22 minority executives within the cohort of some 1,769.

Nonetheless, the replacement of 22 white executives by minority individuals each year would, over five years, add a further 110 to the diverse cohort. We estimate that this would, in total, amount to a participation rate of just over 12%. This suggests that it is possible to make progress, though at a slow rate.

However, there is one notable feature which this analysis has in common with similar breakdowns in respect of gender. The overall fall in white predominance has taken place amongst more junior leaders (at Operating Board level) and the Non-Executive Director level. In the traditionally most powerful positions - Chair and Main Board Executive Directors – white predominance has actually increased by a percentage point.

Conclusion

The overall position of the index shows little change in respect of ethno-cultural diversity. However, where there have been small changes, they reflect small positive movements concentrated amongst Non-Executive Directors and to a lesser extent, Operating Board directors, whilst movement in the key Main Board Executive Director posts is marginally in the opposite direction.

We consider that this provides a clear signal that whilst positive change will not take place naturally, there is potential for reasonable objectives to be met over the next five years.

Appendix – Methodology

We have analysed a total of 1,769 individuals using official company websites and annual reports, informed by industry knowledge of recent people moves.

This update report makes a distinction between two layers of leadership. The larger level includes the smaller level within it.

1. Top 3: Chair, Chief Executive, Chief Financial Officer

2. Top 20: Main Board and Operating Board

Table 4: Ethno-Cultural Origin of FTSE 100 Top 20 Level (The February 2014 data is included in brackets)

OriginExecutive Director (Main Board) (%)

Non-Executive Directors (%)

Operating Board (%) Total (%)

White 96.3 [95.3] 93.2 [95.2] 92.8 [94.0] 93.6 [94.8]

Black 1.0 [0.6] 2.2 [1.5] 2.0 [1.4] 1.9 [1.3]

Muslim 1.0 [2.4] 1.0 [0.6] 1.3 [1.1] 1.1 [1.1]

Hindu + Sikh 1.7 [1.8] 1.3 [1.2] 3.0 [2.5] 2.0 [1.7]

Chinese + Other Asian 0.0 [0.0] 2.4 [1.4] 0.9 [0.9] 1.5 [1.0]

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Within the Top 20 level, we distinguish between Non-Executive Directors on the Main Board and Executive Directors on the Main Board. We contrast both of these with the Operating Board members who do not sit on the Main Board.

We are able to segment this group of 1,769 by ethnicity. As in February 2014, we once again use Origins which utilises unique software and employs a database of 1.2 billion individual records globally to generate algorithms which can associate individual names with their estimated gender, ethnic or cultural identity. The Origins software provides 247 different ethnic and cultural categories within its results. As previously, we have aggregated these results into five core categories, which correspond to the most commonly recognised ethno-cultural groups in the UK. Once again, we have segmented the two largest groups within the South Asian communities along the lines which best describe differences in life-chance outcomes; that is to say, by faith group.

We are confident that these are, in practice, the best correlates for the identity groups’ concerns. In a few cases where a group is identified both by national and cultural signifiers, we have chosen what we take to be the category that most strongly predicts outcomes. For example, Indian Muslims are categorised in the broad group “Muslim”. People of mixed heritage tend to be counted according to their male parental origin, though the combination of personal and family name usually offers a strong indication of the most appropriate category.

Our new results once again segment Main Boards into Non-Executive Directors and Executive Directors. Moreover, we once more add in the level below the Main Board, which we label the Operating Board. This is intended to help us analyse the so-called “talent pipeline” to the Main Board and to address the issue that key decision makers exist at this often neglected level.

This new research differs only slightly in its presentation from the Green Park Diversity Analytics research released in February 2014. In particular, we have accounted for Executive Chairs as both Chairs and Chief Executives in this analysis, if they operate in companies which have no Chief Executive. There are just two such examples currently.

Table 5: Green Park Diversity Analytics Categories and ONS Categories

Our category ONS Category

White White

Black Black/African/Caribbean/Black British

Muslim Pakistani/Bangladeshi/Arab

Hindu + Sikh Indian

Chinese + Other Asian Chinese/Any other Asian