Board diversity is a hot topic in the City. Accordingly, it is no surprise that on 23 March 2016 the Equality and Human Rights Commission (the EHRC) shared new non-binding guidance for companies entitled: "How to improve board diversity: a six-step guide to good practice". The EHRC states that this guidance is written within the ambit of the Equality Act 2010 and the Financial Reporting Council's UK Corporate Governance Code.

A copy of the EHRC guidance is available here.

The six steps suggested in the guidance are as follows:

  1. Defining the selection criteria for board appointments in terms of measurable skills, experience, knowledge and personal qualities

In accordance with the UK Corporate Governance Code, the guidance stresses the importance of having a nomination committee which makes recommendations to the board on the appointment of potential candidates. Care should also be taken by the nomination committee in preparing the role description for potential candidates. The role description should be drafted to attract the widest possible pool of talent to encourage candidates with protected characteristics to put themselves forward and hopefully ensure that the appointment is made on merit. The nomination committee should also avoid mentioning concepts such as "chemistry" in the role description to avoid unconscious bias by the board, who may conjure up a misconception of who the best candidate would be.

  1. Reaching the widest possible candidate pool by using a range of recruitment methods and positive action

The EHRC recommends positive action to promote the role to potential candidates rather than relying on word of mouth and personal networks. Measures suggested include:

  • starting a women's network for senior level women looking to take the next step in their careers;
  • hiring an executive search firm which specialises in the recruitment of under-represented groups at board level or from other business sectors (including professional service firms); and
  • using potentially positive discriminatory language on adverts to encourage under-represented groups to apply for the position.

The EHRC notes that a failure to advertise a role could be indirectly discriminatory as people with protected characteristics will not know about the new opportunity and consequently will be unable to apply for the role. Further, the EHRC says that an employer will not be able to objectively justify a failure to advertise on the grounds of cost alone unless (and exercise caution!) the hiring company is able to show that it has a genuine concern that advertising the role would cause a downturn in its share price.

  1. Provide a clear brief, including diversity targets, to your executive search firm

The EHRC promotes positive action by setting diversity targets to ensure a proportion of candidates from minority groups are considered so long as those measures are not discriminatory. Diversity targets could include creating a long list of candidates which includes a certain level of representation from under-represented groups. Executive search firms should also be encouraged to think outside the box when presenting suitable candidates to your business e.g. by including experienced candidates from less traditional backgrounds, candidates from sectors where women are well represented at a senior level and regularly reviewing the recruitment process to make sure that diverse candidates are not disproportionately sifted out of contention at a particular stage in the process.

  1. Assess candidates against the role specification in a consistent way throughout the process

The Corporate Governance Code requires the appointment of new directors to be formal, rigorous and transparent. Employers should document the recruitment process and keep this documentation for an appropriate period, as evidence in case a decision is challenged by an unsuccessful candidate. Another suggestion made by the EHRC is that employers should avoid stereotyping candidates in the interview process. For example, employers should refrain from asking female candidates about work and family life balance. Unconscious bias training for recruiting staff can help avoid stereotypical assumptions being made.

Employers may also consider taking positive action in recruitment and promotion towards under-represented groups, as provided for in the Equality Act 2010. This provision can be used as a boost for diversity on a board by allowing a company to positively recruit or promote a person with a protected characteristic where:

  1. that person is as qualified as another candidate;
  2. the company does not have a policy of treating persons who share the protected characteristic more favourably than a person who does not share it; and
  3. it is a proportionate means of achieving the legitimate aim of enabling or encouraging those persons with a protected characteristic to overcome or minimise their disadvantage or participate in that activity.
  1. Establish clear board accountability for diversity

The board should seek assurances from its executive team about tackling diversity, perhaps by setting aspirational targets. Progress should be monitored and reported on in companies' annual reports (as required by the Corporate Governance Code) and in shareholder meetings.

Succession planning is extremely important to try to minimise a lack of representation from diverse talent at an executive level. Companies should review their structure to encourage a new generation of under-represented groups to succeed. Companies could consider reserving places on training and leadership courses for under-represented groups, tailoring training specifically for that minority group, offering flexible working arrangements to retain talent or providing access to internal and external support networks.

  1. Widen diversity in your senior leadership talent pool to ensure future diversity in succession planning

​Succession planning is extremely important to try to minimise a lack of representation from diverse talent at an executive level. Companies should review their structure to encourage a new generation of under-represented groups to succeed. Companies could consider reserving places on training and leadership courses for under-represented groups, tailoring training specifically for that minority group, offering flexible working arrangements to retain talent or providing access to internal and external support networks.