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Corporate Boards (Diversity)

Volume 601: debated on Wednesday 28 October 2015

Motion made, and Question proposed, That this House do now adjourn.—(Charlie Elphicke.)

I thought I would start by setting in context the reason for initiating this debate. First of all, tomorrow the Labour peer Lord Davies of Abersoch—not just a peer but a leading businessman in our country—will be producing and publishing his final report on gender diversity on corporate boards. Secondly, as you know, Mr Speaker, I led for the Opposition on these issues for the past four years and maintain a very keen interest in them. Before entering this place, I practised as a lawyer advising companies large and small, and one of my big motivations for initiating this debate is that I often found, particularly when advising our large companies—attending board meetings, taking instructions from clients, going to a completion meeting for a transaction—that there were very few women in the room and I was almost always the only person of colour.

I want to make one observation before turning to the progress that has been made. Very often in this House, debate is characterised by sometimes extreme tribalism, which requires your intervention, Mr Speaker. The Minister shakes her head.

Our debates have been described as “slightly yah-boo”, but the issue of diversity has illustrated that when there is broad agreement across the parties, we can actually achieve great progress and effect change in our society. In the last Parliament we had a Liberal Democrat Business Secretary in a Conservative-led Government, commissioning a Labour peer to carry out a review and then produce a report into how we can improve the way in which our boardrooms in this country operate—what they look like—ensuring that they are more representative. What happened as a result of that approach? In 2010, women made up just 12.5% of FTSE 100 boards. In the FTSE 100 at that point there were 21 all-male boards. Later in 2010, Lord Davies was commissioned to do his work by Sir Vince Cable, the then Business Secretary. In 2011, Lord Davies reported, making a range of different recommendations, and perhaps the one that stood out publicly was the target to ensure that women make up 25% of FTSE 100 boards.

The initial reaction of some businesses and business groups was not necessarily terribly encouraging. We all hear the merit argument: “Why pay attention to somebody’s background? Appoint on merit.” The problem with that argument, as ever, is that if boards have been appointing on merit, the reason that our boards do not look like modern Britain and do not have enough women on them is that there are not sufficient women who merit promotion to the board. That argument does not hold water. It did not hold water in 2010; it certainly does not hold water in 2015.

I am most grateful to my hon. Friend for giving way and I congratulate him on all the marvellous work that he did in opposition on this subject. His comments on gender equality also apply to ethnic minority representation. Today I attended the funeral of a great British entrepreneur—Gulam Noon, who created a business from absolutely nothing. There are people of talent around now—people such as the late Lord Noon—who could easily serve as executive directors on the board of British Airways or others of that kind. It is not that we wait for legislation; this can be done now, if corporate Britain decides to act.

I could not agree more with my right hon. Friend. Lord Noon was a trailblazer, and his passing is a great loss for our country. On behalf of Members in all parts of the House I extend our sympathy and condolences to his family. He was a big man and he made a huge difference.

Effecting change so that we have more Lord Noons and more diversity in the boardroom has required leadership from business groups such as the CBI, the Institute of Directors and the women’s 30% Club. The last Business Secretary also undoubtedly forced change. One of the most important aspects of this debate is the Government ensuring that they keep on the table for business the prospect of more prescriptive action if a business-led approach does not achieve sufficient change. The result of what was done on gender is that in 2015 there are no all-male boards in the FTSE 100, and 26.1% of board members overall are women—a fantastic achievement.

I congratulate the hon. Gentleman on securing this debate on a very important topic. He mentioned that there are no all-male boards in the FTSE 100, but there are 23 all-male boards in the FTSE 250. That is an important point, and I wonder whether he could reflect on the fact that it is not just about boards in the big companies; it is about how we encourage both gender and ethnic minority diversity in middle-sized companies and also in middle management.

The hon. Gentleman is absolutely right; we are talking about the pipeline. He pre-empts my point that, given that we have seen such fantastic progress, there is now a strong instinct to take our foot off the pedal. Yes, the glass ceiling for women is starting to show cracks, but we have yet to smash it. We now need a crusade to ensure that we increase the number of female executive directors. It is a disgrace that in 2015 there are so few women at CEO level in the FTSE 100 and beyond when there is such an abundance of talent out there. That should not detract from our enjoyment of the moment tomorrow when Lord Davies presents his final report and reflects on what has been achieved on gender.

If gender diversity has increased, however, the appalling lack of ethnic diversity in UK boardrooms persists, and progress has gone into reverse in 2015. That is no way for our country to mark the 50th anniversary this year of the first Race Relations Act. The latest annual survey of 10,000 top business leaders by executive recruiter Green Park, which has done fantastic work in this area, shows that the number of visible ethnic minority CEOs is falling, and the number of all-white boards is increasing, at a time when 14% of our population is from a black or minority ethnic background. Today there are just four non-white CEOs in the FTSE 100, following Tidjane Thiam’s move from Prudential to Credit Suisse.

I, too, commend the hon. Gentleman on the brilliant choice of topic for debate. Is there not a danger of examining the symptoms rather than the cause here, which could mean that we end up with the less competent on boards? Should we not be trying to inspire and encourage a range of people on to boards by targeting education and looking at the beginning of the process, which explains why these people are not succeeding in getting to that higher level?

I am afraid that there are simply too many people out there with the talent and ability who are not being appointed. That is the reality of the situation in 2015.

I am grateful to my hon. Friend for all that he is saying, and I congratulate him on his engagement, which was announced in the last few days.

Does my hon. Friend agree that this is not special pleading? If we look overseas to America, we see that they have made huge strides with the appointment of African-Americans and Latinos to boards. That increases the diversity of talent, and most pioneering companies understand that to be the case.

I could not agree more with my right hon. Friend, and I thank him for his best wishes. On the point that he makes, he and I represent very similar constituencies, and we cannot carry on like this. When my young black constituents ask me what they should consider doing in the future, I want to be able to point to people who look like them in the boardrooms, to inspire them to think that they can do it too. In 2015 there are far too few people who I can point to and give as an example.

I congratulate my hon. Friend on securing this Adjournment debate. It is this very subject that led us to create the all-party parliamentary group on governance and inclusive leadership. Members on both sides of the House recognise how important diversity is in business and on boards, and most businesses recognise the business case for diversity. Does my hon. Friend agree?

I could not agree more, and I very much welcome the establishment of that all-party parliamentary group. My hon. Friend mentioned the economic benefits. We are not harnessing the huge benefits that our diaspora communities in the UK can bring to the boardroom—their family connections to and cultural understanding of the emerging markets, as we seek to export more and tackle from a trade perspective a current account deficit which is the largest on record.

In response to what I have said, I call on Ministers, first, to set a target for ethnic minority representation on FTSE 100 boards to be met by 2020, so that there are no all-white boards by 2020. That is a sensible target. The 2020 campaign led by Lenny Henry, Trevor Phillips and others has suggested that. I think that is a reasonable suggestion. Secondly, in 2013 the Companies Act 2006 was amended to require companies to include a breakdown of the number of female employees on boards, in senior management positions and in the company as a whole. We should do the same for ethnicity. If businesses do not know the problem in their workplace, they cannot do anything about it. Finally, Lord Davies has done a fine job on gender diversity. Let us now commission him to carry out a similar review on ethnicity. I praise the Government and the previous Government for their political will to make that happen on gender: get Lord Davies to carry out a similar review into ethnic diversity.

I commend the hon. Gentleman for securing this important debate. Does he agree that the issue in respect of individuals who have a disability also needs to be taken forward, and that it has not been addressed appropriately so far?

I agree. As is often said in debates when we are considering equality issues, it is not a case of either/or; it is and. We need to look at all these aspects.

Ultimately, if there is not sufficient progress in a reasonable time frame, Ministers must be clear that they will act. Both carrot and stick are necessary if we are to build that fairer, more equal Britain where all my constituents, regardless of their background, can aspire to achieve, to reach for the stars and lead British business.

I am always grateful to my team in the Department because they always write me a speech. Most of the speech that has been provided is not of much relevance because I am in listening mode on this issue. The hon. Member for Streatham (Mr Umunna), whom I congratulate not just on his engagement, but on having secured this debate, makes some extremely interesting and valid points, which I did not realise until he secured the debate. I am pleased to record in Hansard some of the things that have already occurred which are interesting and which are at least the building blocks for tackling what is undoubtedly a real problem, which he properly brings to this place. He properly calls on Government, in effect, to take the same attitude to people of different colour, ethnicity and background as we have taken in the past five years to women. That is what I believe the hon. Gentleman is saying. If he is not, he can tell me.

The 2020 group is chaired by Sir John Parker. He is the chairperson—interestingly, it says “chairman” in my notes—of Anglo American plc. The aim of the group is to help to create the climate and conditions in which UK business leadership can take the maximum advantage of the cultural, religious and ethnic diversity available within the population. We know the figures: 98% of all FTSE 100 chairs are white; 96% of FTSE 100 chief executive officers are white; and 95% of the FTSE 100 chief financial officers are white. As the hon. Gentleman has said, that comes from the Green Park leadership campaign and work.

As a result of the 2020 vision, the Prime Minister said that, in the next five years, we will increase the proportion of apprenticeships started by young people from black and minority ethnic communities by 20%; increase the number of BME students going to university by 20%; and work to ensure that 20,000 start-up loans are awarded to BME applicants by 2020.

That is good and laudable and it resonates with the comments made by my hon. Friend the Member for Solihull (Julian Knight), who is no longer in the Chamber. He and my hon. Friend the Member for Chippenham (Michelle Donelan) made the point that we must ensure that people from all backgrounds go into business. The point made by the hon. Member for Streatham was that we cannot wait, because we know that people of ability are in businesses and are more than capable of reaching the upper echelons but are not getting there.

There is therefore a problem. I do not know—I am asking the hon. Gentleman to help me—whether there is research on why more perfectly capable and able people who happen not to be white are not making the progress they clearly should make.

To answer the Minister’s question, Green Park in the main has produced the research. That is one reason why I think it would be fantastic if the Secretary of State for Business, Innovation and Skills asked Lord Davies of Abersoch to do on this what he did on gender. He collated the research, and I am sure the Minister’s civil servants have given her his various reports, which he produces every six months. We need the same kind of evidence-building and research on the reasons why—they may not be purely discriminatory or anything like that—to find out what blockages are stopping such people getting to the top.

I absolutely understand that. Lots of people are doing all sorts of research. After the first Opposition day debate this afternoon, I went to an event in the Shard organised by a foundation called the Pink Shoe Club. It is doing a lot of in-depth work with women to see why, for example, women in small businesses are not having the successes that men have. It is complex. One reason is access to money. Another is that, frankly—I can say this as a woman—it would seem that not enough women have enough aspiration. It is not simply the case that there is still discrimination and bias—I am sure there is and there is no debate about that—but there are lots of other factors. Obviously, with the rise of women through the ranks, there will always be that debate on the topic of children and how women fit their children in with that sort of career and advance. Any man can do it—the problem never seems to stop men having children and continuing their career. It is hugely complicated.

Does the Minister agree that chairmen and CEOs have to lead and say that the issue is important, and they have to mentor? In that sense, it is no different from politics.

I completely agree with the right hon. Gentleman—he is now my right hon. Friend for the purposes of this debate. When I was a Defence Minister, one thing that really struck me was that the people at the very top of the three armed services undoubtedly got it. They understood that it was unacceptable that there were not enough women, gay people or people from ethnic minority backgrounds making their way up through the ranks in the same way that white, straight men were. After the people at the very top got it, we began to see the most astonishing successes. For example, our armed forces have done particularly well in getting rid of the awful discrimination against gay people. Some progress has been made for people from ethnic minority backgrounds. Frankly, we could do a lot more for women. The right hon. Gentleman is absolutely right that it has to come from the top, because that is where the leadership is.

This probably sounds completely obvious to those of us who get it, but it is not about saying, “I want 50% of my board to be women, and I want more people with brown skin on my board, because that’s what we really should be doing.” It is about saying, “We’ve got to have the very best people on our board, so there should be no barriers to them getting there. If there are barriers, how can we be sure that we’re getting the best people?” It is not about saying, “We want more women and more people from ethnic minority backgrounds because that reflects society.” It is about saying, “We want the very best, and that means people with ability have to be able to get on.”

I am listening carefully to my right hon. Friend, who is making a powerful case. She will no doubt be aware that for the past 16 years more than 50% of graduates coming out of Russell Group universities in this country are women, and that more women get first-class degrees from those leading universities than men, yet only 8% of executive directors in this country are women. She is making a powerful case for people to listen and act, but we are not seeing much action, so how will she change that in an acceptable time frame?

I am grateful to my right hon. Friend for that intervention. She brings huge experience to this debate, given her role in government over the past five years. I think that we have made very good progress, and I think that it is accepted that there are now many more women sitting on FTSE 100 boards, but I accept that we are nowhere near where we should be. I take the point made earlier by my hon. Friend the Member for Solihull that it is not just about the FTSE 100. Indeed, there is always a danger that we forget about all the other companies. However, the FTSE 100 is a symbol, so if we can get it right in the top 100 companies the message will drop all the way down to smaller business.

As you are making such good points, may I invite you to attend the all-party group and listen to the Powerlist Foundation and Green Park as we collate all the information and work out how we can fix the problem?

I was just thinking that you would love to attend that, Mr Speaker. I would love to attend as well, so we will see whether that can be arranged.

While assessing the solutions, does the Minister agree that quotas are demeaning and do not foster the necessary culture of diversity?

I absolutely agree. I do not like quotas or targets, but that does not mean that I do not like ambitions—there is an important subtlety in that word. That is why I had no difficulty with some of the great campaigns to get more women into this place or on to boards. I have no difficulty with a hard drive behind ambition, but I absolutely would not go down the route of having strict legal quotas.

With regard to the point that the hon. Member for Chippenham (Michelle Donelan) made about quotas, we looked at that in the previous Parliament, after the European Commission came forward with proposals. I think that the general consensus in the Department for Business, Innovation and Skills was not to rule them out completely for the future, but that they are not something people want to move forward with at the moment. We wanted business to lead the charge, and it has done that. I have a practical suggestion for the Minister. The Powerlist Foundation has been mentioned, and she will be aware of the existence of the list of the 100 most powerful black Britons that is produced every year. I suggest that she meet its representatives, because it would be a very valuable resource for her in finding out about research and getting advice on what to do next. I also ask that we change the narrative reporting rules to require large listed companies in the FTSE 100 to produce statistics on the situation in their business so that they know whether there is a problem that needs to be addressed.

I do not want more regulation. The hon. Gentleman would expect me, as a BIS Minister, to say that. However, he is absolutely right. If people do not look at their own institution, business or whatever to make this analysis—in my chambers, for example, we would look at our stats and our figures—then how do they know when there is a problem and where it might be? It is necessary for businesses to look at this.

The hon. Gentleman made some very powerful points. He had three asks. I hope he will forgive me if this sounds a bit wet, but I would like to not only take this away with me, but, most importantly, to meet him and the key players to look at it and advance it. The Secretary of State is from a particular background, and is no doubt the first person from that background in that role, so he will certainly have an interest in this, especially as he has a business background, as did his family.

In his speech at the Conservative party conference, the Prime Minister gave a very clear direction that he wanted change so that people could overcome issues about their names and so on. I am worried about who we can point to as examples for seven, eight, nine and 10-year-olds, and teenagers, in school in my constituency. That point was made by the hon. Member for Streatham (Mr Umunna). I am hearing very positive words from the Minister, but there has to be a bit more action. The hon. Gentleman said that there has been a mixture of carrot and stick. When the Minister has finished having her conversations and looking at the information, will she at least, short of quotas and regulation, look at what sticks can be used if progress is not made?

My hon. Friend has known me for long enough to know that I do not shy away from things. I am more than happy to look at the kinds of sticks that can be put in place to encourage action now. We are not going to wait for those 10-year-olds to get up to these levels; we have to sort it out now. I know, as a woman, that when somebody has “made it” they can become an incredibly powerful force.

Yes, as a role model. I am a huge fan of mentoring. I have seen the great work that mentors can do with women, and often people from difficult backgrounds, in inspiring them and giving them a helping hand along their journey. I am a huge fan of that. The hon. Gentleman is absolutely right that we need to get the right role models in place.

I am sorry if this is not one of those speeches whereby I just trot out all the usual lines. However, I absolutely give an undertaking that I will speak to the Secretary of State about this debate and the very powerful speech that the hon. Gentleman made. He mentioned Vince Cable. The article in the Evening Standard was very good and very powerful.

I very much welcome the Minister’s invitation to come to her Department to meet her and, I hope, the Secretary of State, and bring a group together to discuss how to move forward. I undertake to do that.

That is excellent. I undertake to see whether Lord Davies’s remit can be extended, now that he has done such great work, in the way that we want. I hope that this gives us a real basis now to do some really good, positive work.

Question put and agreed to.

House adjourned.