Businesses are starting to choose to measure and report pay gaps by race and ethnicity voluntarily in the UK, say Brunswick’s Justine Harris and Deap Khambay. Yours should too.
Why should the ethnicity pay gap matter to you?
With organizations being scrutinized more than ever by investors, regulators, media, politicians and the public, the failure to address the need for workplace equality can lead to significant damage to both a company’s reputation and its culture. It is getting ever harder for employers to assure stakeholders that a workplace has an inclusive culture when there are disparities in pay between certain demographics—whether these are gender based or race and ethnicity based—without a clear analysis and granular explanation.
Ethnic and racial disparities are a difficult topic to discuss, let alone measure and correct, yet doing so is an imperative not just from a moral perspective, but from a business performance perspective too.
Progress within businesses to improve the ethnic and racial diversity of boards and senior leadership teams remains very slow. Commissioned in 2015, the Parker Review was established at the invitation of the UK government to conduct an official review into the challenge of ethno-cultural diversity at board level. And an update in 2020 shows very little progress has been made toward implementing its recommendations. Thirty-seven percent of FTSE 100 and 69% of FTSE 250 companies surveyed still have no ethnic representation on their boards.
According to 2017 research from the McGregor Smith review, the lack of diversity in business is costing the UK £24 billion a year in lost GDP and some large investors are preparing to vote against FTSE company chairs if their boards haven’t met the Parker Review recommendations for ethnic diversity targets on boards for 2022. Diversity also significantly contributes to the ability of firms to attract talent, with 61% of women and 48% of men saying they assess the diversity of a company’s leadership team when accepting job offers, according to research from PwC.
Following on the success of the 30% Club’s work on increasing gender diversity on FTSE 350 boards and senior leadership teams, last year saw the launch of the Change the Race Ratio, a campaign led by the CBI and other leading businesses. It calls for FTSE 350 companies to commit to increasing racial and ethnic diversity among board members and at senior leadership level, by setting transparent targets and reporting on plans and progress through an ethnicity pay gap report. Brunswick is one of the founding members of this campaign, alongside Deloitte, Aviva, Unilever, Microsoft and others, which got off to a strong start in its first year, gaining 92 signatories and some notable ambassadors supporting the campaign.