Research continues to show that where you come from and what your parents do for a living has an impact on the opportunities that are available to you in life: from work experience and career aspirations, through to hobbies and interests. A focus on social mobility is vital to create a fairer, more equitable society.
Businesses have a significant role to play in helping to create such a society. Over the past decade, there has quite rightly been focus and momentum in examining ethnicity and gender traits – and some progress has been made. However, despite data collated by the Bridge Group telling us that socio-economic background has a stronger impact on pay, progression, and access than both ethnicity and gender, socio-economic diversity has been a historically understudied dimension of diversity, particularly in the context of boards.
The board context
The board context is important. It has long been accepted that a diverse board is not just an issue of fairness, but that properly employed, diversity can be leveraged to make boards more effective. It’s about the richness of the board as a whole and the combined contribution of a group of people with different skills and perspectives to offer. People with different experiences, backgrounds and lifestyles who together are more able to consider issues in a rounded, holistic way and offer an attention to detail that might not be present on less diverse boards.
Why is there so little socio-economic diversity in UK boardrooms?
So, the big question is why is there so little socio-economic diversity in UK boardrooms, and why isn’t this being given the same focus and energy as some other aspects of diversity?
Our recent Board Leadership Centre research – albeit draw from only a small sample of FTSE350 board members – is a first step in uncovering how much is known about the socio-economic background of board members and how it is considered by boards during succession planning and recruitment. Perhaps unsurprisingly it found a lack of socio-economic diversity in boardrooms, with just 15 per cent of respondents coming from working-class backgrounds. By contrast, 39 per cent of today’s UK working population come from working-class backgrounds.
Why might this be? Are there not that many people from lower socio-economic backgrounds with the right credentials and depth of experience to sit on boards – after all issues covered are extremely complex? Have all the ‘good’ people from lower socio-economic backgrounds already been snapped up? Do people from lower socio-economic backgrounds not fit comfortably into the board environment?” These statements are pretty close to those called out by BEIS in 2018 as shocking explanations for not having more women on top company boards. Cringeworthy reasons for a lack of gender diversity … and equally cringeworthy reasons for a lack of socio-economic diversity in UK boardrooms.
Why is socio-economic diversity not a priority for nomination committees?
Perhaps more surprising than the lack of socio-economic diversity across FTSE350 boardrooms is our finding that 84 per cent of respondents said that their boards are not measuring the socio-economic background of board members, and that 69 per cent said that their nomination committees were not addressing it during succession planning. Almost all respondents (92 per cent) said that they were not asked about their socio-economic background during their recruitment process. To my mind, this suggests a lack of prioritisation compared to other diversity traits.
But it also raises another question. Core to the nomination committee role is ensuring that the board (and senior management) has the right combination of skills, backgrounds, experiences, and perspectives to probe and challenge management's strategic assumptions and to support management in navigating the company through an increasingly volatile and fast-paced global environment. And, Principle J of the UK Corporate Governance Code clearly sets out that both appointments and succession plans should, inter alia, promote diversity of social backgrounds. Yet how can boards properly apply this Code Principle when so many of them are not measuring the socio-economic background of board members nor addressing it during succession planning?
Why are boards not reporting on how appointments and succession plans should promote diversity of social background?
Also, you would expect that the Financial Reporting Council would be keen to call out companies that don’t apply the Code Principles, or at least draw attention to the failure of many companies to address this important area of diversity within their nomination committee reports and diversity disclosures. Yet, their recent review of corporate governance reporting is conspicuously silent in this space. Why is that? Why are two pages devoted to gender and ethnicity, but there is no mention of the absence of corporate disclosure around how appointments and succession plans promote diversity of social backgrounds? It seems to me that diversity of social background at the top of UK Plc is not being prioritised. One might even say that it is being side-lined. And, for the record, I am not suggesting that we play diversity top trumps, but if we care about the positive impact diversity has on board effectiveness and decision making, but don’t think about socio-economic background as well as all the other important diversity characteristics, then we miss an important part of the jigsaw.
