FTSE Small Cap and AIM executives still overwhelmingly white

Lucy Harley-McKeown
·3 min read
The vast majority (96%) of AIM UK 50 directors and 95% of SMC remain white, according to a study. Photo: Getty
The vast majority (96%) of AIM UK 50 directors and 95% of SMC remain white, according to a study. Photo: Getty

FTSE Small Cap (^FTSC) and AIM listed companies have failed to make any significant inroads in progress on racial diversity in their leadership ranks.

According to the second annual diversity report from Company Matters, part of Link Group, the vast majority (96%) of AIM UK 50 directors and 95% of SMC remain white.

Also, in the last year there has only been one net addition across both cohorts. They continue to fall behind the FTSE 100 (^FTSE), which now has 11% BAME representation on its boards.

84% of AIM and 78% of SMC 100 companies have all white boards, over double the proportion seen in the FTSE 100.

Out of 324 positions on AIM UK 50 boards whose ethnicity could be determined, there were only three black directors, two of these were members of Pan African Resources, and none an executive.

Chart: Company Matters, of the Link Group
Chart: Company Matters, of the Link Group

Despite a lack of progress in racial diversity, in last year’s report, it appeared that gender diversity was starting to improve, and that trend continued into 2020.

Women now make up 33% of SMC boards, which is ahead of the FTSE 250, with two-fifths of new appointments in the last year being women.

Among the AIM UK 50 the proportion of women directors has risen two percentage points to 20%, although this shift is almost entirely driven by non-executive directors, rather than executives.

There was, disappointingly, no increase in female executive roles in either the AIM or FTSE Small Cap constituencies on a like-for-like basis. In the AIM UK 50, women still are outnumbered by almost 16:1 (94% v 6%).

The report also reveals that just two AIM UK 50 and seven Small Cap 100 companies set measurable objectives for board diversity.

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Those that follow the UK Corporate Governance code are expected to publish detail on board diversity policies as well as the weight these have in making appointments and planning succession. But despite this, the proportion of Small Cap 100 with a policy has dwindled to 7%, down two percent year on year.

There is potential for further government mandates on this, with suggestions that new obligations may be implemented on social diversity and mandatory ethnicity pay gap reporting.

Tracey Brady, managing director, Company Matters, Link Group said: “Change needs to happen and it needs to happen at a faster pace than we’re currently seeing. The top FTSE 350 listed companies in the UK tend to dominate attention in the diversity debate. But they are not fully representative of UK corporate culture.

"There are more than a thousand smaller listed companies on the main market and AIM indices and tens of thousands of private companies.

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"They employ far more people between them than the top FTSE 350 companies and tend to be more domestically focused, meaning they reflect UK company leadership and the lived experience of the UK workforce much more than their very large, often global, counterparts."

Alexandra Altinger, CEO of J O Hambro Capital Management, UK, Europe & Asia, said: “Vitally, this report draws attention to an under-discussed issue in the wider UK corporate sector. The focus has historically been on the lack of diversity on the boards of FTSE 100 or FTSE 350 companies, but as we can clearly see from these findings, there is a much wider issue around leadership diversity in the many smaller listed companies.

“Diversity, as well as being a moral issue, is soon likely to become a financial and regulatory hurdle for businesses. As investors shift their focus to ESG, otherwise strong firms might find themselves let down by their failure to address diversity issues within their corporate governance strategy.”

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