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November 2010
Nick Saalfeld founded MoneyWorld (now MoneyExtra), the UK’s first personal finance website; and was Business Editor for AOL for three years. He now runs a media consultancy, Wells Park Communications, and is a director of two further companies. He blogs at www.truebusiness.co.uk
Will the new Equality Act resolve the challenges facing diversity in the workplace?
On October 1st , the Equality Act 2010 came into force; superseding and uniting a raft of equal opportunities legislation to protect the rights of minority groups in all aspects of daily life, including business.
According to the guide “Diversity in the Boardroom” by the Government Equalities Office and the CBI, barely 7% of FTSE250 directors in female. Only 4% of FTSE100 directors are from ethnic minority backgrounds. There is only one black FTSE100 CEO; Tidjane Thiam, the (somewhat beleaguered) CEO of Prudential plc.
The Act was widely discussed at the September meeting of the Interim Management Association (of which Interregna is a founding member); and rightly too – not only because recruiters of interim managers should abide by both the word and spirit of the law; but also because in the naturally conservative environment of the boardroom, interim placements are an ideal opportunity to redress the balance.
“Diversity in the Boardroom” cites three factors for the relative absence of minority representation on UK boards: unconscious stereotyping; exclusivity at the top and a consequent lack of access to influential personal networks for minorities; and an inadequate appointment and succession process which sees search consultancies propagate the “old school tie”.
Furthermore, as business leaders are beholden to their highly conservative shareholders and have large amounts of their own and their company’s money to carefully steward; there is every incentive for those who do successfully break through the glass/race ceiling to keep a relatively low profile- and certainly not to beat the drum for equality of opportunity. Rated by New Nation magazine as the most influential black male in Britain, Damon Buffini (Cambridge, Harvard, Schroders, Permira), for example, is considered to be one of the most successful yet reclusive business leaders of his generation.
Will the Equality Act resolve these challenges?
No.
I’m not being defeatist: the problem with laws is that they are relatively blunt instruments; it’s very hard indeed to compare like with like when it comes to candidacies and CVs, and therefore very hard to present a credible case in court. There are specific industries in which remarkable recruitment processes have resolved this situation: in the traditionally chauvinistic world of classical music, several orchestras have taken to conducting “blind auditions” in which musicians play for a panel from behind a screen. This is hardly an option for the conduct of executive searches in FTSE100 companies.
But more importantly, companies are economically rational creations: if you want to change a company’s policy, change the balance of incentives. Far from being idealistic, this is something governments do every day of the week.
Take, for example, the CRC Energy Efficient Scheme from the Department for Energy and Climate Change. Without a good reason to stop burning fossil fuels, companies will not do so. CRC therefore creates a competitive league table of large organisations’ usage of non-renewables. Rise up the league and you receive a dividend. Fall down the league and you are penalised. This creates a perfect artificial incentive scheme for environmental friendliness.
If we were to put exactly this sort of scheme into action to encourage equal opportunities, it would result in accusations of positive discrimination. Besides, climate change is simply a bad thing, whereas there is no right or wrong number of white middle class male directors of companies.
Yet we can still incentivise the consideration of equality of opportunity. At an awards ceremony in early October celebrating diversity among suppliers to large organisations, Mayankh Shah, Director of Minority Supplier Development UK said “Given the changing make up of the UK's population and the need to build a sustainable economic recovery, it's critical that diversity is debated at a national level”.
In other words (admittedly mine, not Shah’s, but it’s a fair extrapolation): if business views multiculturalism as a series of walled gardens, we might as well close our eyes to new markets; whereas if we remember that the melting pot of Britain has money to spend – whether it’s the pink pound, the black pound, the female pound or the disabled pound – the idea of a uniform society is simply an anachronism.
To target a highly segmented public without reasonably diverse views, lifestyles and backgrounds being represented at the top table would seem to be equivalent to running the marathon blindfold. Major businesses should not need a legal cosh to be encouraged to take on minority leaders- an economic justification will do nicely.
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