Diverse boards lead to better corporate culture and performance

News types: Codes and Standards Announcements

Published: 20 July 2021

  • building and maintaining diversity requires proactive planning, concrete actions and consistent prioritisation

  • diversity is a long-term, multi-stranded journey where progress in one area is not a guarantee of progress in another

  • there is still have a long way to go to fully access the diverse talent in the UK population.

There has been a step change over the past decade with UK Listed company boards becoming more diverse than ever before, primarily as a result of the Hampton Alexander review and more recently the Parker review.
The research, Board Diversity and Effectiveness in FT350 Companies, published today by the FRC in conjunction with London Business School, Leadership Institute and SQW found that the effort to diversify boards pays benefits in terms of boardroom culture and performance.  To maximise these benefits boards should recognise that change takes time and that diversity without active inclusion is unlikely to encourage new talent to the board.
 The main findings of the research concluded that:
  • It is the responsibility of the Chair of a board to drive inclusion.

  • Regulators and companies must focus on collecting more data on the types of diversity, board dynamics and social inclusion

  • the Nomination Committee itself should be diverse and have a clear mandate to work with search firms that access talent from wide and diverse pools.

  • The greater representation of women in the boardroom is reshaping culture and dynamics and benefiting businesses from a social justice as well as a performance perspective

Sir Jon Thompson, CEO, FRC, said:

“The FRC wants to see companies which thrive in the long term and both benefit the economy, society and reflect its make-up. I want to see boards invest time and energy in making diverse appointments not to achieve a target but because it will have a positive impact on their business. The UK Corporate Governance Code makes it clear that board appointments should promote diversity and we want to see nominations committees reporting on progress. 
I am pleased that this research supports the need for companies to set clear targets and report against them as a means to improving diversity. Many companies only set targets for gender and to a lesser degree ethnic diversity.  We support the proposal that nominations committees should be diverse and have a mandate to work with executive search firms that will find talent from diverse backgrounds.”

Dr Randall S. Peterson, Academic Director, London Business School Leadership Institute and Osman Anwar, Director, SQW, Said:

Board diversity should be a priority for every organisation. Successful boards care because they want to perform as a team in service of their organisation, and in service to the world.
Diversity takes many forms. The findings of the report remind us what is at stake: diversity is not just a numbers game with regards to who is on the board, how board members interact really matters.

We hope this report will stimulate new thinking and action on how all groups can genuinely feel included and supported at the ‘top table’.

Notes to editors:

The FRC’s purpose is to serve the public interest by setting high standards of corporate governance, reporting and audit and by holding to account those responsible for delivering them. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.

The London Business School Leadership Institute strives to raise the standard of evidence-based practice in global leadership by:
  • Driving leadership research into practice by actively translating findings into teaching and outreach activities that cause leaders to rethink and improve their practice of leadership
  • Creating a generation of leaders who have a global view, a strong sense of community and who lead from their heart, as well as their head
  • Being a globally recognised destination for leaders to access research, teaching, and practice on leading and leadership.
SQW is a leading provider of research, analysis and insight on sustainable economic and social development for public, private and voluntary sector organisations across the UK and internationally. Core services include: economic, social and environmental research and analysis; organisation and partnership development; evaluation, economic impact assessment and appraisal; policy development, strategy, and action planning. The firm is part of SQW Group, which also includes Oxford Innovation – a provider of business premises and advice.

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