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Honesty and diversity can bring change

25 July 2018 by Simon Osborne

Honesty and diversity can bring change

Organisations must have those difficult conversations if we are to see progress

Black Sun’s report ‘Less perfection, More authenticity’,  got me thinking about the forthcoming ICSA Awards, which take place at the Park Lane Hilton on 27 November. The Black Sun report only refers to the FTSE 100, whereas our awards are open to the FTSE 350, but some of the findings struck me as particularly apposite.

Black Sun’s assertion that companies do not often tell an authentic story that truly communicates their uniqueness, warts and all, in a way that builds trust with investors and other stakeholders, resonated with me in particular. Companies are overseen and managed by humans, so they are far from perfect.

Annual reports that attempt to paint companies as perfect or near perfect are of less value to those who rely on them. The ICSA Awards strive to reward companies for exemplary reporting – and honesty is an essential part of this. Truthful and authentic communication is the primary way in which companies can help to improve trust in business.

It is interesting that the six principles of trust that the Black Sun report highlights – purpose, culture, stakeholders, diversity, wider value creation and long-term thinking – are all areas to have seen reporting growth in the past year. Likewise, we have noticed that companies within the FTSE 250 are also providing a greater link between purpose and strategy, risk and strategy, as well as more information around stakeholders, long-term thinking, values and culture.

The push by investors, the UK government and regulators in these areas over recent years has obliged companies to take notice and concentrate their efforts where change is needed. Companies are now paying much more attention to environmental, social and governance (ESG) issues as investors now take greater account of issues like diversity, executive pay and environmental impact.

Legal & General Investment Management (LGIM) is one such investor (and you can read our interview with the firm’s director of corporate governance, Sacha Sadan) with a big interest in board composition, remuneration, climate change, succession planning and transparency.

As one of Europe’s biggest asset managers, LGIM’s stance is that it will vote against or divest from firms whose progress on climate change is insufficient; oppose pay increases for executive directors that are out of line with those for their workforce; and vote against chairs of FTSE 350 firms if less than a quarter of the board is female. An approach like that carries genuine weight.

“The specific characteristics of an individual – is always more important than the ticking of any ‘diversity box”

It is admirable that LGIM is such a vocal advocate for increasing the number of women on boards, but it should be remembered that diversity is not about gender alone.

Real diversity depends on personal characteristics. Diversity of thought – the specific characteristics of an individual – is always more important than the ticking of any ‘diversity box’. As a society we should be in a position where the best candidate will always get the appointment; diversity should be a fact of life, not an issue.

However, that is not where we are. In our society there is an inherent bias towards some sectors or groups and against others, and there has been throughout history. This is why today, even where an organisation appoints now on a fair basis, as many do, there remain significant groups in our society that are under-represented.

That means all of us, particularly recruiters and managers, thinking about the reasons why the majority of senior roles are held by middle-aged white men and taking reasonable action to encourage and support members of under-represented groups; and thinking about the reasons why some of our talent is held back.

It also means that we have to have those ‘difficult’ conversations – the conversations about gender and race, the conversations about stereotyping, the conversations about bias towards ‘people like us’ and, perhaps above all, the conversations about which of these reasons we can address as an organisation and which are the result of socio-economic factors that lie beyond our or our organisation’s pay grade. We must then taking action where we can and raise awareness where we cannot.

These are not comfortable conversations and there will be mis-steps along the way. We have to accept that and make allowances accordingly for good intentions.

But unless we start those conversations, unless we start thinking differently and taking the action that we can, we cannot expect change. And without change we will continue to ignore a significant proportion of the talent available in our society; talent which we cannot afford to waste.

Finally, I cannot close this piece without commenting on the diverse array of speakers at this year’s ICSA annual conference in London. We had over 90 speakers sharing their expertise with us and the variety of thought that they brought to the conference made for a highly informative two days.

Simon Osborne FCIS is CEO of ICSA: The Governance Institute

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