Financial watchdog calls for more FTSE board diversity

The City’s financial watchdog has called for more women and people from ethnic minority backgrounds on the boards of listed companies, after a review found that greater board diversity was linked to better financial performance. The latest research commissioned by the Financial Reporting Council found that the top 50% of FTSE 350 sample companies that had at least one woman on the board experienced higher levels of EBITDA margin after three years. Financial results were less clear with regard to ethnic diversity, because there remains a stark lack of people from ethnic minority backgrounds on corporate boards. In 2020, 59% of FTSE 350 companies did not have a single non-white director. Nonetheless, researchers still said there was a “significant” relationship between a greater ethnic diversity of FTSE 350 boards and a reduction in shareholder rebellion. They found that having one more non-white board member was associated with a 4 percentage point decrease in the probability of shareholder rebellion. They also found that the nomination committees themselves should be diverse and have “a clear mandate to work with search firms that access talent from wide and diverse pools”. Sir Jon Thompson, chief executive of the FRC, said: “I want to see boards invest time and energy in making diverse appointments, not to achieve a target, but because it will have a positive impact on their business.” The findings come at a sensitive time for the property industry in relation to the issue of diversity, after an anonymous letter published by EG laid bare how racial discrimination continues to pervade the sector. Last year’s EG race diversity survey revealed that 69% of people from ethnic minority backgrounds have experienced racism while working in property. To take part in this year’s survey, click here. Randall Peterson, academic director at London Business School Leadership Institute, and Osman Anwar, a director at research firm SQW, said in a joint statement: “Board diversity should be a priority for every organisation. Successful boards care because they want to perform as a team in service of their organisation, and in service to the world. “Diversity takes many forms. The findings of the report remind us what is at stake: diversity is not just a numbers game with regard to who is on the board – how board members interact really matters.” To send feedback, e-mail alex.daniel@eg.co.uk or tweet @alexmdaniel or @EGPropertyNews