Smaller firms failing on boardroom diversity

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FTSE Small Cap 100 (SMC) and Alternative Investment Market (AIM) companies are failing to make progress on racial diversity, according to new research.

In its second annual diversity report, fund management services provider Company Matters found that 96 per cent of AIM UK 50 directors and 95% of SMC directors are white – in the last year there has only been one net addition across both cohorts. They continue to fall behind the FTSE 100, which now has 11% BAME representation on its boards.

Eighty four percent of AIM and 78% of SMC 100 companies have all-white boards, more than double the proportion in the FTSE 100. Out of 324 positions on AIM UK 50 boards whose ethnicity could be determined, there were only three black directors, none of whom were in an executive post. 

In the previous year’s report, it appeared that gender diversity was starting to improve, and that trend continued into 2020. Women now make up 33% of SMC boards, which is ahead of the FTSE 250, with two-fifths of new appointments in the last year being women.

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Among the AIM UK 50 the proportion of women directors has risen two percentage points to 20%, although this shift is almost entirely driven by non-executive directors, rather than executives.

However, there was no increase in female executive roles in either the AIM or FTSE Small Cap constituencies on a like-for-like basis. In the AIM UK 50, women still are outnumbered by almost 16 to one  (94% v 6%).

“Change needs to happen and it needs to happen at a faster pace than we’re currently seeing, Company Matters managing director Tracey Brady said.

“The top FTSE 350 listed companies in the UK tend to dominate attention in the diversity debate. But they are not fully representative of UK corporate culture. There are more than a thousand smaller listed companies on the main market and AIM indices and tens of thousands of private companies.

“They employ far more people between them than the top FTSE 350 companies and tend to be more domestically focused, meaning they reflect UK company leadership and the lived experience of the UK workforce much more than their very large, often global, counterparts.”

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Just two AIM UK 50 and seven Small Cap 100 companies set measurable objectives for board diversity. Those that follow the UK Corporate Governance code are expected to publish detail on board diversity policies as well as the weight these have in making appointments and planning succession. But despite this, the proportion of Small Cap 100 with a policy has dwindled to 7%, down two percent year on year. 

“If such large proportions of the population are not rising to the top because of their race, gender or age, then huge pools of talent are going untapped, limiting the potential for individuals and the whole economy,” Ms Brady added.

“As we look to a post-pandemic future, we are going to need to tune every aspect of fitness to Olympic standard to get the UK back on its feet. Making sure that UK business is reflective of modern society is an essential part of that. Only then can the economy truly go full speed.”

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