Summary: The Global Future Diversity Index: International and cultural diversity in British business

Diversity

Summary

posted on 8th October 2018

In Brief

Diversity on boards is crucial for many reasons. In recent years government and business have made steps to address gender and ethnic diversity on the boards of the UK’s leading companies, but as post-Brexit Britain seeks greater trade and penetration in wider markets overseas, British business must also think about international diversity.

The Global Future Diversity Index addresses that gap in our understanding – and finds while international representation from developed markets is sound, emerging markets representation is woefully lacking. These are the very markets that the UK and many British businesses see as critical to our future success.

2%
Proportion of
board members
on FTSE 100
who are
British BME
North American Directors fill 163
FTSE board positions,
but India & China
fill just 13
combined

In all walks of life, the ability to draw on a wide range of skills, perspectives and experiences brings huge benefits. For businesses, avoiding groupthink and ensuring that decisions are properly tested is vital – and so is understanding the markets they operate in, engaging with customers and stakeholders from a range of backgrounds, and demonstrating a commitment to serve the whole community. And yet too often, executive boards have been dominated by a narrow clique, people who share the same sex, the same race, the same social background, the same nationality. Companies which exclude diverse voices are missing out.

In recent years, businesses – and the Government – have increasingly recognised this and there has been some change. Global Future’s research has found that now just 43 per cent of FTSE 100 board members are white British men.’ More women than ever before are on the boards of Britain’s top companies and the FTSE 100 is on track to meet the target of having women make up 33 per cent of boards by 2020, although it still seems likely that the FTSE 350 will fall short. Progress has been slower on other diversity measures. The Parker Review found that in 2017 just 2 per cent of British FTSE 100 board members were UK citizens of colour, even though around 14 per cent of the UK population is non-white. Global Future’s research shows that there has been barely any change on this measure. Here, Britain’s leading businesses must do better.

The case for international and cultural diversity has attracted less attention. However, with so many companies operating across a wide range of countries and regions, and managing global supply chains, a single-nationality board is almost certainly a disadvantage. Board members who understand the different regions in which their company works, and who have experience of doing business there, will be better equipped to help their company negotiate the ever-greater challenges of operating in a global marketplace. There is no one size fits all. A company’s need for international diversity on a board should be determined by its geographic footprint and the international nature of its customer base and workforce, as well as by its strategic ambitions.

Our research finds that although UK firms are more internationally diverse than their counterparts around the world, there are clear signs that they may be underprepared to gain penetration beyond traditional markets. Even today, Britain’s global footprint as a trading nation is not matched by the international diversity of our boards. Directors from emerging markets currently fill just 7% of positions on UK boards, and just 16% of all non-UK held positions, yet trade with these markets accounts for a quarter of British exports. After Brexit, the need to reach out to less traditional markets is likely to make this even more of a problem for our businesses.

This report looks at the case for international and cultural diversity in our businesses and introduces a new tool, the Global Future Diversity Index, which shows how our top companies fare on this dimension. We also present an update on progress with respect to gender and ethnic diversity. Finally, we close with some suggestions for making progress in all areas of diversity.

 

Download the full report here

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