New diversity transparency rules come into force

SOCIAL entrepreneur Safaraz Ali thinks that new rules to make large companies report how they are doing on diversity are a good thing but much more needs doing.

As business leader, he is founder of the Multicultural Apprenticeship Awards, the Multicultural Apprenticeship Alliance, a member of the Asian Business Community Leadership Board of the Institute of Directors and a Fellow of the Institute of Employability Professionals.

The new regulations will cover 1,100 public listed companies and those falling short will have to explain why they are not doing what is expected of them.

But the regulations that will be overseen by the Financial Conduct Authority stop short of imposing sanctions for failure and companies are unlikely to be fined or have shares suspended.

However, the FCA has not ruled out making changes when it reviews the situation in 2024, although it will be mindful of potential costs and disruption to businesses.

From 2023 companies listed on the London Stock Exchange will need to disclose information about ethnic and gender equality in their annual reports.

The benchmarks set include having at least 40 per cent of women on a Board and for at least one Board member to be from an ethnic minority.

An existing target set by the Parker Review, headed by Sainsbury’s former chairman David Tyler, was for every FTSE 100 company to have at least one Board director from a minority ethnic background by 2021, with 95 per cent meeting the target.

This target will be extended to FTSE 250 companies by 2024.

In the past decade there has been a lead in the proportion of women holding Board positions in FTSE 350 businesses from 9.5 per cent in 2011 to 37.6 per cent in 2021.

Safaraz Ali, founder and chief executive of skills and employability provider, the Pathway Group, believes that whilst progress is being made there remains a long way to go.

He is in favour of targets but not quotas.

He states: “Targets are aspirational, but quotas are prescriptive, and I do not feel this is the right approach.

“The increasing recognition of the value of having a diverse workforce is encouraging but it is important that this is seen as a good business decision and not just tokenism.

“There has been significant progress on gender diversity and some with respect to ethnicity.

“It provides a wider perspective, makes for better decision making, more effective risk management and helps reduce ‘group think.’

“But whilst this is a start there is much more that needs doing, including at senior management levels but below Board.”