Following on from the Parker Review on ethnic diversity at board level (see the article from our November newsletter here), in late March the McGregor-Smith Review on race in the workplace generally was published. The Review notes BEIS analysis which estimates that the potential benefit to the UK economy from full representation of Black and Minority Ethnic (BME) individuals across the labour market would be £24 billion per year, representing 1.3% of GDP. It goes on to make 26 detailed recommendations to improve diversity within organisations. Most of these are directed at employers and include:
- listed companies and all businesses and public bodies with more than 50 employees should publish five-year aspirational targets and report against them annually
- listed companies and businesses with more than 50 employees should publish a breakdown of employees by race, ideally by pay band, on their website and in the annual report
- businesses with more than 50 employees should identify a board-level sponsor for all diversity issues, including race, who should be held to account for the overall delivery of aspirational targets. To ensure this happens, Chairs, CEOs and CFOs should reference what steps they are taking to improve diversity in their statements in the annual report.
A couple of the recommendations are directed at government, including that it should legislate to ensure that workforce data broken down by race and pay band is published.
The government's response to the Review was published on the same day and, as expected, was broadly supportive although it rejected the recommendation to legislate on the publication of data. The government will, however, monitor progress and be ready to act if sufficient progress is not delivered. It notes that companies are already required to use the strategic report to document information about their employees and social and community issues and that companies can choose to report information such as diversity of their employees as part of this. Alternatively, investors could ask for diversity information to be included or ask for diversity information at the AGM.
Business Minister Margot James has written to the chief executives of all FTSE 350 companies calling on them to take up key recommendations from the Review including:
- setting aspirational targets
- publishing a breakdown of their workforce by race and pay
- nominating a board member to deliver on those targets.
We expect that these companies, and others to whom the recommendations apply, will act accordingly.