Written for The Independent on Sunday, Dec 12, 2004 by Maggie Lee.

`When I see a shortlist that includes a woman and someone from an ethnic minority, I automatically veer towards them. It’s hard for anyone to climb the greasy pole and all other factors being equal, I tend to assume that women and minorities have overcome far more to get on to the list.”

These are the words of a former executive who has worked for a number of FTSE 100 companies. To most people, his views are simple common sense. In the City, however, they put him in the minority.

The fact is that most FTSE 100 company boards are male – and pale. Last week the Trade and Industry Secretary, Patricia Hewitt, added her voice of concern, pointing out that although the number of women entering the boardroom was on the up, nearly a third of all blue chips still have no female board members.

The Department of Trade and Industry, in collaboration with the Institute of Directors, last week launched a new guide, Building Better Boards, to tackle the problem. Drawing upon attempts by the Government to appoint women and people from minorities into leadership roles, it aims to show that diversity in the boardroom is better for business.

Private sector companies are exempt from the statutory duty that public sector organisations have to promote racial equality and diversity in employment. Conclusive data on the ethnicity of board members is also patchy. But a survey of 40 blue chips, commissioned by the race relations think-tank the Runnymede Trust, found that ethnic minorities held only 1 per cent of senior management positions.

Professor Shamit Saggar, of Sussex University, author of an influential Cabinet Office report on ethnic minorities and the labour market, says that firms of accountants and lawyers have been more successful than the blue-chip companies in addressing the issue.

“They recognise that the problem is not with intake, but occurs later on in the pipeline,” he says. “It’s at the middle level where the careers of minorities seem to get stuck. Technical competence is rarely the issue: rather, it seems to be the case that minorities somehow miss out on opportunities that enable them to develop networking and supervisory skills. These skills are more heavily weighted as you climb the tree.”

Professor Saggar believes this cycle is relatively easy for partnerships to fix on account of the owner-managed culture. In contrast, in large corporations it takes longer to engineer processes and structures.

He also acknowledges that there may also be other, more subtle factors, hindering career progression: “It could be the case that imputed discrimination may be in play in the same way that it existed in politics. For example, seven years ago you’d hear party officials saying they would willingly select a woman, but they didn’t think it fair on the candidate, as the electorate would not accept a female candidate. Interestingly, today the evidence indicates that the electorate in the main wants the best person to represent them, irrespective of ethnicity or gender.”

Others believe that the issue lies in the methods used to develop and select people. Professor Nigel Nicholson of London Business School, who regularly talks to financial services companies about ethnic diversity, thinks that the selection criteria applied by blue chips can be unnecessarily restrictive.

“There’s a lot of implicit tribalism in companies, with people tending to recruit in their own image. This creates a cyclical effect, which goes some way to explain why the selection criteria at the top eventually become so narrowly cast and why pale, male- dominated organisations tend to feel at ease with people like themselves.”

To break this cycle, which he describes as “elected affinity”, organisations must ensure “smart processes” are in place in companies to develop talented people from unconventional and diverse backgrounds. Professor Nicholson thinks that early educational and career development opportunities are instrumental in shaping individuals’ career paths.

Recent studies have shown that networking and mentoring are critical in the route to the top of corporate life. These are skills that are favoured less by some minorities and women, who instead prefer to focus on technical and professional competence.

Dr Ingrid Prescod, a colleague of Professor Nicholson who has investigated the career paths of minorities in large organisations, says: “Two of the most advantageous actions ambitious minorities and women can take in a company are to learn from influential mentors and invest in networks.”

But she adds that women, in particular, tend to view this as political behaviour. However, she says: “Networks exist for a purpose: they are a valuable source of information and visibility. Because of the size of large businesses, you can’t know everyone in the organisation, so it’s vital to develop rich relationships that enable you to have a clearer picture of what’s actually happening around you.”

Virginia Bottomley is head of the board practice for executive search firm Odgers Ray & Berndtson, as well as being Conservative MP for Surrey South West. She says that one reason for the limited number of women and ethnic minorities reaching the boardroom is that companies frequently draw up narrow job specifications for boardroom positions. “It can become difficult to achieve diversity if the favoured candidate needs to have extensive plc experience or be a known figure in the City,” she says.

Ms Bottomley nonetheless believes that it is incumbent upon headhunters to develop networks to find talent. She cites management consultant McKinsey, investment bank Goldman Sachs and oil company Shell as examples of companies that are addressing the issue. “These are places where, without doubt, there’s going to be a quarry of talented individuals to join boards,” she says.

There are more prescriptive ways of ensuring that women and minorities are represented in the boardroom. In Sweden the government insists that women occupy 40 per cent of all board appointments – although the British government has ruled out a similar move. In fact, the Swedish rule could potentially have an impact on the limited stock of UK female boardroom candidates.

Ffion Hague, director of headhunting firm Hanson Green and wife of former Tory leader William Hague, says that her firm has been approached by a number of Swedish companies to identify talented UK candidates, to complement their shortlists.

James Reed, chief executive of Reed Executive, was a member of a task force that presented proposals on racial equality and diversity in the private sector to the Government in July. The task force attempted to demonstrate the business benefits of diversity, namely a broader talent pool, a better understanding of customer needs and stronger national and global branding.

Advocating voluntary change, the task force recommended that if businesses could not demonstrate a step-change in their commitment to race equality and diversity, then government should consider using legislative measures to ensure that they take stronger action. The Government has yet to respond to this point.

Mr Reed says that one of the biggest barriers to recruiting minorities is corporate nervousness. “There is a level of discomfort around talking about these issues because people are nervous that they may say the wrong thing and be attacked. It’s a shame, as there are a lot of companies out there with good intentions.”

And this issue – corporate nervousness – could be one of the biggest barriers to the appointment of more minorities and women to Britain’s boardrooms. Because, if companies are afraid to talk about the issue, then it’ll be a long time before Ms Hewitt’s aspirations are met.

Read the article here.

Copyright 2004 Independent Newspapers UK Limited