The Privileged Few Benefit From Racial Inequality
On the last day of Black History Month we are already into a General Election campaign and today's focus from Labour is on the elites and the rigged system. But what about the way in which the financial system has been rigged against people of colour?
We approaching 200 years since the Slavery Abolition Act, 1833 which gave freedom to all slaves in the British empire and signaled the end of the transatlantic slave trade. UK slave owners were compensated to the collective sum of £20 Million at the time (around £20 billion in today’s money). Black people received no compensation and were forced to work another four years (for free) for their former slave masters. The economics were not good for Black but were great for many White people who became wealthy from this brutal enterprise.
There is no doubt that the UK has a long tradition of benefitting from the exploitation of Black and other people of colour. The Bank of England, RBS, Barclays and Lloyds (among many other institutions) have benefitted from the slave trade. The last three companies are FTSE 100 organisations and none of these have a Black person on their Board of directors. Surely this is an oversight and not indicative of FTSE 100 companies in general?
A study, conducted in 2017, resulted in a report known as the Parker Review highlighted that only 8% of the Board of FTSE 100 companies have a person of colour as a director. The same study revealed that 51 companies did not have any persons of colour on their Board. Further, UK citizen directors (of colour) made up around 2% of the total number of directors. This figure is in stark contrast to that of national statistics which indicate that people of colour make up around 14% of the UK population. The Parker review did not specifically report on the percentage of Black persons on the Board of FTSE 100 companies.
Moving forward to 2019, has anything changed? My research reveals that: around 2.96% of Boards comprise people of colour (i.e. non-Whites) that are also UK citizens. Only 0.76% of Boards comprise Black persons that are also UK citizens. Although there is a marginal increase in the number of non-White persons on Boards (from 2% to 2.96%) and number of Boards with such persons (from 49 to 55) the rate of improvement is abysmal. The Parker review recommended that each Board should have at least one person of colour, as a director, by 2021. It is very clear that at the current rate even this low-level requirement will not be met.
It is patently clear that Boards have interpreted diversity as almost exclusively meaning the inclusion of more White women. This is evidenced in the number of Boards that have a White female director – 100% and the ratio of such females on Boards have increased over the years. The average ratio of White females (across all Boards) is around 30% whilst that for Black women is 0.78% and for Black men is 0.62%.
In response to the matter of Women on Boards, the UK government (under Theresa May) passed legislation, in 2017, requiring all organisations with 250 or more employees to report on their gender pay gap. Women continue to be under-represented in employment and suffer a pay gap. However, despite Black and other people of colour being even more under-represented, the UK government has yet to make legislation for a race pay gap, even though this was promised.
It is acknowledged that the government has published a consultation document (which closed in January 2019) and that analysis of race by ethnicity might be more complicated than by gender but both issues have been prevalent for the same amount of time. The question must be asked why the government has not treated gender and race with the same level of importance. Could it be that they, like many FTSE 100 Boards, are not as committed to race as they are to gender?
Anecdotal evidence suggests that some organisations say that they might find the data collection and reporting on race pay to be burdensome. However, I believe that race pay reporting should be treated in the same way as for gender which are both protected areas under the UK’s 2010 Equality Act and the government should act to swiftly introduce necessary legislation for race pay reporting.
Beyond the reporting of race pay gaps, the UK’s Financial ReportingCouncil (FRC) should modify its corporate governance standards so that both race pay gap reporting and ethnicity composition of the Board are detailed in its annual reports. Since the FRC’s governance standards applies to all FTSE 100 companies this would provide opportunities for corporations to showcase their commitment to ethnic diversity.
In line with the current approach of some Boards to gender diversity, governance standards should require that Boards demonstrate how they are attempting to be more ethnically inclusive in terms of the positioning of internal candidates for Board positions. They should also be required to disclose how they are actively seeking to identify suitable external candidates that are from the Black and other ethnic minorities.
The economic case for more ethnic inclusivity is compelling. A 2017 report from the Chartered Institute of Personnel Development (CIPD) estimates that around £24 billion could be added to UK GDP if Black people and ethnic minorities were to be fully represented across the labour market. This type of economics not only works for the majority but would help to improve the social welfare of the minority of people in the UK.
Howard Haughton specialises in corporate governance and leadership development, and is a Senior Visiting Research Fellow at Kings College London.