Introduction
Diversity and equality in the workplace are best understood as concepts that promote and enhance a culture of inclusion. Stakeholders in the corporate environment have altered their decisions in order to accommodate, enhance, or celebrate diversity. Certain assumptions have caused this shift towards greater diversity; some may be borne out of goodwill from an organisation or others may come from a legal framework. This research will dwell on the judicial component of equality and diversity. However, because this is a wide topic, greater focus will be given to diversity and equality issues among company directors.
Research Hypothesis
The UK has come a long way in terms of equality and diversity laws. The Equal Pay Act, which was passed in 1970, spearheaded these changes; it was later amended in 1984. Another one was the Rehabilitation of Offenders Act 1974, which was passed in order to safeguard against discrimination of former criminal offenders. The Sex Discrimination Act 1975 covered gender-based discrimination in the workplace, and was later amended in 1999 through the Gender Reassignment Regulations Act. The Race Relations Act 1976 was another legislation, which identified race as a protected trait in law; this was later amended in 2000 and 2003 respectively. The Disability Discrimination Act 1995 recognised the rights of disabled persons and protected them from discrimination and unfavourable treatment; it was later replaced in 2005. The Protection from Harassment Act 1997 also came into force at a time when harassment issues were deemed to be fundamental in law. Other laws such as The Employment Equality Regulations on Religion and Sexual Orientation were all passed in 2003. EU Employment equality regulations were passed in 2006, and they recognised age as a protected trait. Finally, the Equality Act 2010 was passed and this marked a holistic approach towards diversity issues in the workplace. All these laws indicate an adversarial approach to the concept of diversity since most of the Acts protect workers against discrimination. In other words, they are more reactive than proactive and they focus on remedying situations rather than creating a positive environment. Because of this, the research hypothesis in this paper is:
“UK diversity laws lean more towards avoidance of trait based disadvantages rather than providence of equal chances to all individuals.”
When expressed in another way, the main research question in this paper is: “Does UK diversity law effectively promote equal opportunities in boardroom appointments (for directors)?”
In order to answer this research question, one must look at the existing laws on appointment of directors and then combine these with equality or diversity legislations on the same. Thereafter, practical statistics on company directorships will be provided especially in terms of the demographics. Finally, one must make a conclusion based on these findings concerning the differences that exist between various demographic groups.
Findings
Statistics on Company Directors Demographics
Ethnic Diversity
A report given by Plimmer and Smith illustrates that the number of foreigners in UK company boards has increased8. This is not a direct indication of directors’ ethnicity, but it is an indicator of improvements in ethnic diversity. The analysis was carried out in 2010 and revealed that 40% of all company directors in the UK were foreign. When compared to 2005, this represents a 14% increase in the number of overseas directors in the country. Unlike gender diversity, which has been governed by legal and gender-based principles, most moves to select a racially diverse board of directors are done in order to facilitate and improve business in the global market9. Usually these non nationals emanate from certain parts of the world that share similar cultures with the UK, so, even if foreign nationals may appear to have increased, ethnic and racial representation is yet to improve. Plimmer and Smith have shown that 25% of all international directors are from the US or Canada while Asian directors represent only 6%. Ethnic minority representation in boardrooms is still rather low as illustrated by these latter figures.
Gender Diversity
A study of 455,300 British companies carried out by Martin et al. found that an under-representation of women in directors’ positions exists in the UK. Only 27% of all company directors were women while men took up 73%. Additionally, it was found that women were still disproportional to men in directorships. In other words, only 10% of the companies in the research had a majority of female leaders. Industrial representation and the nature of the company also determined how female directors were represented. For example, it was found that smaller companies were more likely to have this demographic of directors than larger ones. Size was assessed based on asset value of the company. Firms that had less than 2.8 million pounds worth of assets were classified as small firms and the rest qualified as big firms. It was also found that the manufacturing sector had a higher proportion of men than the business service sector as female directors had greater numbers in the latter section than the former one. The study illustrated that only 2% of all the companies had an all-female leadership board while 35.2% had an all-male board. 24% had equal representation of men and women in the board of directors while 10% had majority female directors in the board. This research illustrates that gender parity is still illusive in most company boards within the United Kingdom.
An even more recent research has found that the number of female company directors has increased slightly between 2010 and 2011. This clearly illustrates effects of legal analyses of company directors. In 2010, Lord Davies did an analysis of female directors in the UK and recommended positive action. Firms responded to those findings even before any legal measures were put in place. Currently, it has been shown by Egon International that in 2011, 33% of all company directorship appointments were female centred yet these were just 15% in 2010. While female representation is still low, there are prospects that it will keep increasing. Nonetheless, when one looks at the numbers retrospectively, it is clear to see that this may take some time. For instance, a look at the top 100 FTSE numbers shows that over the past ten years, a 5.8% increase of female directors has been achieved. At this pace, it will take slightly over seventy years in order to have an equal number of men and women. The law does not explicitly require specific action; as such, firms may be acting this way in anticipation of some stringent government and legal requirements. If firms are changing their appointment habits gradually in anticipation of change, then chances are that legalisations will increase these numbers tremendously.
When compared to the international landscape, the UK lags behind a series of other nations. Nordic nations have been found to have a higher number of female executives than the UK. In Norway, about 40% of all company directors are female. This is quite distant from the 12% found in the FTSE top 100 companies and the 27% found by Martin et al. in the UK. Clearly, there are differences in these representations because Norway’s legal system differs from the British one. In Norway, legislators instated a quota system that requires 40% female representation in all company boards; the UK has no such policy in place.
Significance of Boardroom Diversity
Investors are concerned about the array of views and skills prevalent in their boardrooms because these affect company operations. Since shareholders choose people who are appointed to boards, they need to ensure that investors’ demands are met. Shareholders ought to try out new approaches to appointments, as diverse boards would increase richness of organisational ideas. They have started realizing that company performances are likely to increase if people with different backgrounds are put together. As the figures show, boardroom appointments have always been done conventionally. In other words, most firms like to stick to familiar methods. Since females have always been under-represented, then using the same appointment methods severely limits these organisations’ diversities. By sticking to past company strategies, many firms are narrowing down their appointment pools, and this is preventing them from growing. What’s more, it should be understood that firms are created in order to meet societal needs. As a result, their boards should be reflective of these differences; otherwise, it would put them out of touch with the society that they are supposed to be representing.
Studies have often shown that women have greater spending power than men do, accordingly firms would benefit from their insight in profit making aspects of directorship and this is the business case for gender diversity. Alternatively, if an international firm does business in a different part of the world, then it would make sense to appoint people who fully understand that market. This is the reason why racial or ethnic diversity is important in these executive positions. Therefore, one can say that diversity in executive positions facilitates competitiveness, since the more assorted a firm’s board is, the higher the chances of doing well in the marketplace.
Governments are now realising that women are rarely giving a chance to prove their worth. They have not had equal time and resources like their male counterparts, and this is ruining the country’s ability to reach its full potential. Eventually, this may undermine economic performance because not all resources are being utilised.
The UK government may be prompted to act given the immense gender representation gap between this country and others in the EU. Countries such as Iceland, Norway and Spain already have quotas in place in order to curb these differences. Recently, France passed a legislation that would also allow 40% quotas among the top-performing firms in the country for female directors. The legislation was passed in January 2011 and affected firms have been given a period of eight years to comply. However, the UK has no such restriction. The government may be put under pressure to do something, especially in the wake of the Lord Davies report and other equality and diversity measures. It is imperative for firms to start from within rather than wait for compulsory government intervention.
The corporate environment now expects greater transparency in directorship appointments. Improved disclosure also implies respecting the differences that exist between likely candidates, and proving to investors that processes are free from favouritism or discrimination.
It has often been shown that when the behavioral characteristics of a certain group of people are synonymous, then chances are that they may be influenced by the group-think phenomenon. Crucial decisions are likely to be made based on these similarities, and it may undermine the performance of the group. However, if the group has a rich assortment of members, then chances are that everyone will bring a different dimension to work policies. Mckinseys research group carried out a study and found that boards with greater than 30% female representation tended to perform better than those with fewer numbers. This was attributed to the fact that their leadership styles and manner of thinking were significantly different.
The Law and Boardroom Diversity
Appointment of directors is governed by the Companies Act 2006. In Part 10 and Chapter 1, a number of stipulations have been codified in the Act concerning Appointments. First, the Act lifts any restrictions on age. Previously, there was a limit on the age of company directors at age 70 but this has since been lifted. The only limitation is that a person must be over age 16 in order to qualify. A private limited company needs to have at least one director while a public company should have a minimum of two. In addition, a director does not have to possess special formal qualifications. He or she must not be bankrupt and should not have been disqualified by the bank to act in that capacity. At least one natural person is required while the other directors maybe companies or institutions. The same Act states that considerations need to be given concerning directors’ abilities to carry out their functions.
Diversity and selection of board members have indirectly been mentioned in the Equality Act 2010. Section 45 stipulates selection of members. Limited liability companies can be either owner-driven or manager-driven, which means that they may possess a board of managers who are recognised as a board of directors by law. Diversity issues in directorship appointments can be inferred from this component of the Act. Discrimination is expressly prohibited when deciding: who will be appointed as a member, the terms that the person is entitled to and denial of the position. Upon appointing an individual, the constitution specifically states that a firm cannot discriminate against the person in terms of access to training, transfer, and expulsion. The organisation cannot subject someone to detriment. Organisations are also prohibited from harassing a candidate for appointment or membership. Appointing bodies may not victimise an applicant through the terms stated in subsection 2.
Currently, the law does not allow affirmative action in boardroom appointments. In other words, organisations may not simply decide to hire certain groups of people such as women or minorities without merit considerations because that is tantamount to discrimination. Nonetheless, the law does allow positive action. There is a distinct difference between positive action and positive discrimination. Positive action is legal as stipulated in the Equality Act 2010 part II Chapter 1. Here, a firm may deal with historical under representations by promoting directorship applications in certain groups. Section 158 describes the conditions under which positive action can take place. Appointing bodies can only apply the principle of positive action if they decide that individuals have suffered disadvantage in a particular position that is linked to a component of their identity. Suffering disadvantage may not be sufficient to lead to positive action. Appointing bodies must also illustrate that needs prevalent in this protected group are different from those of other people that do not share the same identity. The targeted group should be shown to be disproportionately represented in a certain activity. The Act also specifies reasons for implementing positive action. It may be done in order to: reduce or eradicate disadvantage encountered by certain groups, meet particular needs, and encourage participation in an activity. If regulations already exist, then one may not engage in positive action.
In this study, it has been demonstrated that directorships are characterised by a lower number of women and ethnic minorities. Consequently, it is permissible for shareholders to address this problem by taking positive action. During the recruitment process, this Act specifically states that one may choose to select a certain candidate with a protected trait if it has been found that there are equally qualified candidates. Section 159(3) specifically prohibits favourable treatment based solely on a protected characteristic. Positive action can only be applied if the company has not created another policy that governs treatment of equally qualified persons in relation to the position. It must also be shown that taking that action will directly lead to achievement of positive action aims. If only a small correlation exists between the two aspects, then recruitment of persons with the targeted trait may be rendered inadmissible. Recruitment in this context is defined as a mechanism for offering employment, contracts, appointments to personal or public office, and memberships in limited liability partnerships. The Act applies to directorships because the appointment of directorships can occur in limited liability partnerships with a manager-based approach. Directorship appointments may also be classified as appointments to a personal office.
From the Act, appointing bodies or shareholders are not obligated to select a certain group of people specifically for directorships. However, when potential appointees have met all the traits that they are looking for, then they have the freedom to select an under-represented group to promote positive action. Nonetheless, this section of the Equality Act 2006 does not necessarily imply that under-represented groups can only be selected when all candidates have the same qualities, but it expands this. Even though candidates may have different qualifications, it must be shown that they are able to carry out their directorship duties when placed in office.
Furthermore, before the shareholders can implement positive action, they need to show that the groups chosen have been disadvantaged in that particular workplace. Unless there is evidence to prove that the group has been disproportionately represented, then shareholders or appointing bodies may be regarded as discriminatory; they cannot select that party randomly. If an organisation has decided to implement positive action, then the targeted entity ought to reflect actual proportions in certain society. For instance, the census results show that ethnic minorities make up 15% of the population, and if a certain boardroom lacks these members, then those numbers can be adjusted in order to reflect societal realities. It would be discriminatory and illegal if a certain firm tried to get too many minorities as directors because this is not proportional to the actual population of that respective group. Doing so, would lead to an under-representation of other racial groups in the country. The main point here is that considerations should first be given to the candidates’ merits and their abilities before other protected characteristics can be considered.
The law allows diversity programs in boardrooms. Usually, these initiatives aim at increasing representations of ethnic minorities, females or persons with disabilities through a diversity policy. Here, the affected group (such as females) may get into a mentorship program with a certain company. Beneficiaries can get advice regarding non-executive board positions. Usually, an external recruitment firm will control and administer such a program. The law also recognises female networks. These individuals are in executive positions in different industries and inform one another about potential opportunities in various businesses. Network members will still go through the same appointment processes that their counterparts go through but will have the advantage of getting the information about those vacancies. The law also recognises frameworks that have been created in order to boost female talent. In such forums, leadership development is nurtured and this makes women more likely to advance to top-level executive positions in the corporate scene.
Since the UK is a member of the EU, laws passed at the regional level affect it. Certain directives have been passed in order to deal with diversity and equality issues. One such example is the 2000 EU Race and Employment Directive. Article 7 of this directive specifically states that member states are not bound by the concept of equal treatment. They are permitted to engage in measures that prevent disadvantage to a racial, disabled, ethnic or any other disadvantaged group. The Directive urges immense consultation between an organisation and the people it is recruiting. In this case, appointing bodies and potential directors need to be engaged to foster diversity. During those consultations, it will be necessary to identify the prevailing problems with regard to diversity. The paper has already identified under-representation of females and ethnic minorities, so, shareholders need to engage with potential appointees to find out how these problems can be solved. They must then implement those issues that were discussed.
The 2002 Race Directive asserts that member states ought to be taking measures that are designed to prevent disadvantaged groups from facing those same disadvantages. The EU has given provisions for positive action, but the UK legislative framework has not fully embraced the possibilities that these create in the boardroom.
How Companies are Choosing Directors
Several firms select directors based on their experience in the same position. In other words, most would prefer someone who has already served as a director in a public limited company. Usually, minimal considerations are given to diversity requirements, as deduced from statistics regarding board members’ demographics; most are older white males. A large proportion of companies in the UK prefer selecting directors who have similar career patterns, cultural and social backgrounds, and experiences. Companies are more interested in the people they know rather the directors they require.
Recruitment processes will look at candidates’ conceptualisation of their role as executive or non-executive directors. They must know how to transfer their current skills into their new roles. Such a quality can create difficulties for people who have not been exposed to directorship roles. Disadvantaged groups may not meet that criterion since appointing bodies rarely reach out to them. Candidates who qualify as directors need to explain to shareholders or appointing bodies how they would add value to that board. Women and members of certain ethnic groups have access to fewer chances than their male and mainstream counterparts do. Aspiring directors must comprehend how accountability mechanisms work in that particular board. Since such knowledge emanates from informal networks, then disadvantaged groups may have a hard time demonstrating this. In addition, aspirants are assessed based on their commitment to the role and the passion of a director. Disadvantaged groups hardly get such an opportunity because of the inherent biases that exist among appointing bodies.
Discussion
The research findings have very adverse implications. First, they confirm that the traditional model of diversity is still very influential in the UK. Earlier legislations such as the Sex Discrimination Act (1975) and the Disability Discrimination Act (1995) are governed by the principle of sameness. This traditional approach to equality puts forward the notion that all people must be treated in the same way if they are in identical situations. The case of Zafar TVs. Glasgow City Council [1997] 1 WLR 1659 HL exemplifies this principle; since the defendant was not obligated to take action based on the plaintiff’s differentiating characteristic. Therefore, when selecting board members, shareholders or appointing bodies must make sure that they treat every likely candidate for board membership equally. This model looks at differential treatment in a negative way. It requires that members should not be distinguished based on ethnicity, gender and so on because it assumes this would be detrimental to that group. While some changes have been made to legislations through the Equality Act 2010, the consensus is that these differences still exist today. The traditional model does not acknowledge the fact that treating people in the same manner can lead to negative consequences. Such is the case with directorship appointments. As it has been seen from the research, most directors are predominantly male and white. Females and ethnic minorities have therefore been indirectly discriminated upon because the law has historically propagated such a model.
However, there is indeed room for optimism based on certain provisions found in the Equality Act 2010. This law represents a new approach to diversity (better known as the diversity approach) because it acknowledges the institutional role. Therefore, it has a greater capacity to affect boardroom appointments than previous legislations on the same. When diversity legislation merely focuses on the individual through anti-discrimination lawsuits, then this creates the danger of slowing down change. Organisations are only prompted to act if an individual makes a complaint against them. In the case of boardroom appointments, the traditional model would only permit an individual to take action against a board if that person was dismissed based on their identity. This traditional approach would make it very difficult for anyone to contest directorship appointments because no obligations are imposed on the concerned company. However, in the diversity approach, organisations are obligated to be more systematic about their approach to recruitments. Shareholders or other stakeholders responsible for appointment of directors are expected to initiate positive steps that will lead to the promotion of diversity. This new model embraces positive action designed to address certain challenges that have been faced by particular groups. Section 158 of the Equality Act 2010 for the first time allows this phenomenon and therefore postulates a diversity approach. This can be directly utilised in boardroom appointments because it has been clearly revealed through research that large gaps exist between male and female directors. In addition, statistics that the number of ethnic minorities in directorships is disproportionately low.
While positive action is permissible in law now, it still does not represent the spirit and overriding principle governing the latest Equality Legislation, which is the Equality Act 2010. Stakeholders need to know that the provision will have a small effect on boardroom appointments. No obligations have been placed upon organisations to enact any policies that will address these difficulties among female or ethnic directors so the numbers may not change dramatically. It can therefore be said that there is very limited scope to implement these changes.
In fact, there is a slight contradiction between the ‘positive action’ components of the Equality Act 2010 and the ‘anti-discrimination’ components of the same Act. This is because positive action initiatives put in place by firms on boardroom or directorship appointments may be classified as discrimination. In other words, measures designed to correct indirect discrimination in the boardroom can sometimes be viewed in the reverse as being discriminatory to particular races or genders. Therefore, firms will need to be very careful about positive action because it is easy for such an initiative to supersede the limits of the law.
The anti-discriminative nature of UK diversity law illustrates an inherent weakness in this area. Since boardroom appointments can only be contested on an individual basis, if someone feels that he or she has been removed because of a certain trait, then that places undue burden on the part of the disadvantaged person. It is also unlikely that one complaint against the appointment process in a certain firm may alter the institutional wrongs against diverse groups. Evidently, this is not a constructive approach to change in institutions. The bias towards individualism severely limits the transformation ability of the law. Responsibility has therefore been removed from the organisation and has been placed on the individual. This creates a bad atmosphere; fault-finding becomes the only permissible way to embrace diversity in directorships. Clearly, this mode of thinking is not tenable in the world today. Organisations have become highly competitive and seeing as adaptability is a key trait for survival, then firms have to reflect that in their senior-level positions. Promoting equality of opportunity can only be possible when the stakeholders all take responsibility. State regulation is not enough; individuals aspiring for directorship positions need to work together with existing directors as well shareholders in order to make certain that transformations have been fostered within their organisations.
In order to have a full understanding of why this approach to law is problematic, one must analyse the situation from the perspective of the aspiring or potential director. Directors receive a lot of rewards for their contributions but before selection, most of them still hold high positions in institutions within relevant industries. Consequently, if a person was not elected into a boardroom based on unfair grounds such as favouritism or discrimination, then that person may not want to jeopardise his or her standing in the industry by suing his or her appointees. Women, ethnic minorities and other disadvantaged groups simply find it too troublesome to challenge the status quo, and as such, most of them would prefer leaving things as they are. Besides, unless the circumstances leading to disadvantage among certain groups are resolved, individuals would be discouraged from confronting the problems of diversity in company directorship appointments.
Currently, appointing committees for directorships are adopting a wait -and -see attitude. Most of them prefer not to do anything about under-represented parties, unless the law compels them. Diversity to them may seem like a burden imposed upon them by the authorities. As the case is today, some recommendations were given by Lord Davies about the need for positive steps towards incorporation of diversity in directorship appointments. Appointing committees have not realised that this is a green light for them. There has also been a lot of talk about quotas, which would forcibly require all companies to appoint a certain percentage of an underprivileged group; current focus is on female under-representation. The lack of fuller engagement with diversity issues among boards has indeed caused many appointing boards to be fearful and agitated by the potential for state imposed quotas.
Given the current environment of restrictive diversity laws, company boards have the opportunity to protect themselves from liability if they create a proactive field. For instance, The Disability Discrimination Act of 1995 and the Race relations Act of 1976 all possess provisions for vicarious liability. In this regard, if a director has been removed and he or she raises claims of discrimination based on his or her identity, then an appointing body may defend itself against such a claim by citing the diversity initiatives it has spearheaded. In other words, the concerned organisation can claim that it has done all that is reasonably possible in order to prevent discrimination. Therefore, although the law does not expressly protect organisations that have initiated diversity strategies, it can be advantageous for firms to start such initiatives as it offers them a possible line of defence.
The UK is likely to be influenced by the provisions made in the EU 2000 Race and Employment Directive. If cases are to be presided by the European Court of Justice, chances are that they may be governed by principles of positive action. Indeed, this idea is not far-fetched as seen in the case of Lommers v Minister van Landbouw. Mr. Lommers raised the concern that the Ministry of Agriculture in Dutch was only giving female officials permission to use the institution’s nursery. Men got this opportunity only during emergencies. The court ruled in favour of the Ministry by arguing that employment opportunities between males and female were almost equal, and it was only certain conditions of work that were found to be different. These facilities were available to working mothers and to single fathers so any differential treatment had been neutralised. The Equal Treatment Directive 76/207/EEC was used for this very purpose. Article 2(4) states that prejudice in promotion of equal opportunity can be eliminated through removal of existing inequalities. Such was the case with the nursery issue. The major implication of this ruling in the EU is that the ECJ does recognise deviations from equal treatment. As a result, member states have to adopt an attitude of positive action. The latter case also has implications on boardroom appointments because claims could be raised against appointing committees. If the appointing group comprises of members of the EU then the matter maybe decided by the European Court of Justice, and this could eventually lead to implementation of similar rulings. UK laws, therefore, need to move in that direction in order to foster a legal environment that works in tandem with the EU.
Currently, there are no positive action obligations that are imposed upon member states by the EU. Consequently, the UK legislative framework must reflect societal pressures independently. Since its neighbours are governed by principles from the EU, then chances are that their decisions are likely to affect the UK. The move towards a diversity-based approach can be viewed as being more in tune with future changes than current legislative stipulations in the EU and UK. Shareholders that appoint directors using a diversity approach can be regarded as people who are moving in the right direction with the law albeit at a faster pace.
The law does not adequately address possible dilemmas that appointing bodies may face if they are dealing with two conflicting diversities. The Equality Act only covers dual discrimination; that is, when an individual has been disfavoured because of two protected characteristics such as race and religion. The law does not outline how organisations can embrace diversity if divergent views exist. For instance, it may have members who are sexist on grounds of their religious beliefs. Such appointing members may prefer candidates from a certain gender because of those values. A company will have a difficult time trying to correct this wrong; because, if it disregards the opinions of such members, then it may again appear to be intolerant. Firms must select qualities that are more important than others. In such scenarios, a decision ought to be made on the quality that is likely to lead to litigation. The lack of ground rules on equality norms in the law has put organisations in a very difficult situation.
Women and ethnic minorities are under-represented in boards because of three major reasons. The first relates to personal factors. Some members of appointing bodies actually believe that the groups do not have the necessary qualifications for sitting in boardrooms. These assumptions are biased against those disadvantaged groups. Secondly, certain interpersonal factors may also be contributing towards this continued under-representation.. Since under-represented groups lack informal networks that would facilitate their entrance into boardroom positions, then chances are that they will remain stuck in their current positions. Even the appointment processes lack transparency. Very little information is known about how openings are exposed to the public and how selections are done. Private companies have been guilty of this practice. Informal cultures and negative biases are partly to blame. Any initiatives designed to deal with these challenges must incorporate such hidden traits.
Recommendations
Since it has been found that the current legal framework is inefficient in handling diversity needs, because too much emphasis is given to the punitive – individualistic aspect, then greater focus should be given to the institutional component. In other words, directorship appointers need to be as responsible for diversity measures as much as the potential candidates are. In addition, firms need to put in place certain designs that can help in the overall elimination of problems confronting protected groups. Everyone needs to cooperate on this issue. Otherwise, state interventions are likely to lead to minimal changes. Organisational cultural shifts will be essential in making shareholders and other appointing parties more responsible. Diversity needs should not just be tied to economic benefits for the organisation because such goals are likely to be abandoned once the organisation goes through a downturn. Stakeholders in an establishment are unlikely to believe that the diversity initiative is genuine if it is only tied to economic values, so shareholders need to be sensitized about the non economic importance of embracing diversity in their daily endeavours. When the promotion of diversity becomes a priority for shareholders, then this is likely to curb the reactive role taken on by organisations every time a piece of legislation is altered. During the appointment of directors, companies would already be in tandem with these legal changes and would no longer think of it negatively.
Many organisations are having a hard time merging their diversity priorities with the prevailing anti discrimination laws. This is because they do not know what to prioritise and what to consider later. Current anti-discrimination laws need to be merged with organisational processes for promoting diversity so that they can be in tandem with one another. This would spare shareholders from having to enact changes, which supersede the limits of the legal framework and that would in turn hurt them.
Many boards are currently engaged in diversity initiatives and have even sourced for expert help on the same. However, the major challenge is that sometimes these experts may not be as well versed with the law as they ought to be. Consequently, most of them find that they are wasting company resources by focusing on certain strategies that may turn out to be illegal. The illegality usually arises unexpectedly and from the least likely groups. Boards must realise that it is necessary to combine their own diversity model with the legal framework that they are operating in.
Affirmative action may not be the way to go given the current legal structures. This is because it is inclined towards discrimination than positive duty. Nonetheless, the best way of encompassing these changes in diversity would be to promote equal opportunities through the concept of positive duty. That is a change that many shareholders or appointing committees would find acceptable, as it is not a radical departure from what they have come to know and understand.
As stated earlier, UK laws and legislations are also not very clear on situations that require acknowledgement of difference and treatment of individuals similarly. The matter arose in the Lommers case, and the EU set out some guidelines but these are not universal across all member states. Organisations still have the opportunity to make those choices independently. They can decide to treat applicants differently when this will lead to a level playing field. Once individuals are on an equal footing, then companies need to treat all applicants equally. Tensions arising out of fundamental assumptions in law can be easily resolved if firms exercise these basic assumptions in the diversity model. Lessons can be drawn from the Lommers case because the Ministry involved had to deal with these tensions. They drew the line between equality and difference when they realised that parents are not all the same, so they cannot be treated equally. Fathers and mothers have different needs; they cannot also be accorded the same privileges. It is their circumstances that cause them to be placed in a similar category. Single fathers and working mothers had the same needs, so they needed to be treated differently from other types of parents. Correspondingly, appointing bodies that have to decide on whether to treat potential directors and actual directors similarly or differently should consider the circumstances that lead to disadvantage. They would have to exercise proper judgement in deciding the kind of approach that needs to be taken.
When implementing the diversity model during selection of candidates, companies must understand all the dynamics at play. If positive action is initiated in favour of a certain group, then not all shareholders or members of the appointing body will fully support this initiative. Others may even construe it as a form of discrimination against non-members of the protected group. It is persons like these who may initiate lawsuits against appointing bodies based on their positive action initiatives. Therefore, organisations should only engage in positive action within the confines of anti-discrimination law so that they can protect themselves from litigations from disgruntled parties.
The country can also move towards incorporation of the diversity model in law by rewarding organisations that have instated positive action. As the case is today, firms are not obligated to do this. If they are given an incentive, then more appointing bodies or shareholders will be encouraged to take up positive action. A possible route would be through vicarious liability clauses. These can be formally made into lines of defence for organisations that are facing unlawful discrimination charges. They can employ such a dimension when they already have collective action procedures in place. Having this kind of approach would definitely lead to better outcomes.
Since it has been found that internal biases and interpersonal factors have placed certain groups at a disadvantage in boardroom appointments, then companies can handle those differences by overcoming these deep-seated obstacles. A diversity model that embraces difference would inculcate a culture of acceptance and would systematically neutralise these long-standing injustices.
Conclusion
The current set of anti-discrimination laws breed an environment of mistrust, hostility and antagonism. In this sense, most organisations are reactive rather than proactive in diversity matters. Equality issues have not been given the priority they deserve in directorship appointments. Even legal provisions for positive action (as seen in the Equality Act) have not been successful at encouraging a holistic approach because no obligations have been imposed upon firms. The result is a failed attempt at providing disadvantaged groups with equal opportunities.
The disproportionate number of ethnic minorities in boardrooms can prove these assertions. A majority of foreign directorship appointments involves Westerners who belong to similar racial groups. Females are also underrepresented in most boards as their numbers are unusually low compared to their male counterparts. Based on current estimates of change, researchers affirm that female representation in executive or directorship positions will be equivalent to male representation after 70 years. The evidence supports the notion that equality of opportunity in boardrooms is far from being achieved in the UK.
Current laws and legislations on diversity are highly centered on the traditional model, which focuses on the individual. These refer to diversity laws with special emphasis on the Equality Act 2010. Very little emphasis has been given to organization-led change initiatives. No legal direction exists on systematic changes in appointment processes. Because of this, companies have adopted a non-participative culture, which cannot address disadvantage as a diversity issue. Certainly, a diversity-based approach is superior to a traditional approach and this should be a goal sought by appointing bodies and shareholders prior to the recruitment of new directors. Such a model will assist in the evolution of the legal process. The country’s structural frameworks for positive action are weak yet these are indispensable in providing equal opportunities in law. Positive action has recently been introduced in law but this component does not take up a large share of the country’s legislation.
In the process of searching for equality, it is recommended that organizations embrace a positive action model. However, this does not imply affirmative action or quotas because that would not be in line with current laws. The market is not yet ready for such a radical move. It is likely that a less aggressive but effective method would work best. Companies need to make a commitment to diversity, and they need to gain certain legal incentives based on those decisions. If they can take on direct responsibility for diversity, then female representation or ethnic minority representation is likely to improve.
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