Recession is no excuse for going backwards on diversity

At a recent conference on creating opportunities for diverse talent, chaired by the Financial Times, Conservative peer Lord Shinkwin warned that “whatever the rhetoric, dismissing equality, diversity and inclusion as somehow part of the woke agenda is to turn your face against equality of opportunity”. 

His words were given weight by Jonathan Geldart, director-general of the Institute of Directors, who added that “in the face of economic uncertainty, there is a risk of the task of progress of recent years being eroded”.

This threat feels very real as the UK approaches recession. The slow but definite progress made in recent years on areas such as gender pay and diverse representation on boards, as well as corporate governance and the environment, is now seen as at risk.

The CBI, Britain’s largest business group, last week raised concerns from its members that policy progress on green issues was going backwards, linked to a government seen by some as cooler on climate change than previous administrations.

Indeed, the government’s actions are under scrutiny. In September, Jacob Rees-Mogg shocked many in business when — in his brief spell as UK business secretary — he floated the prospect of cutting back gender pay reporting under the cover of stripping burdensome employment rights.

There were similar sentiments behind a recent letter from 40 MPs to the chancellor, Jeremy Hunt, demanding cuts to supposedly “woke” causes — as The Daily Telegraph reported — such as equality, diversity and inclusion, given cost constraints facing the public sector.

“Woke” in such a context is a politically charged insult, but it matters in the wider context of a weak UK government and a spending crisis.

Positive words and actions from leaders, in parliament and business, create the background and impetus that leads to change, such as gender pay reporting. Backsliding on these makes it harder to resume impetus in future.

Many companies see the need to keep a focus on inclusion and ESG in workplaces, but the voices complaining about the resulting cost and time burden are getting louder.

A recent report by Tulchan Communications compiling the thoughts of FTSE chairs was heavy on complaints that “box-ticking” exercises from investors risked company growth.

One chair even said that the “public company model is broken” because “70 per cent of the [board] agenda is typically governance and regulation . . . directors have to worry about whether their gender pay gap has gone up or down and what that might mean, and what will be written about it in the Daily Express.”

Given the anonymised responses in the report, we can assume truth-telling on the part of those surveyed. This particular chair may be on the margins of what most boards believe, but arguing about gender pay gaps as part of a wider tirade on governance feels like going backwards by about a decade.

Certainly what is troubling those in the boardroom is unlikely to be what is troubling many of their employees, who are likely to be facing below inflation pay rises. Women, as well as disabled people and those from ethnic minorities or less affluent backgrounds, are often among those paid less on average, according to the Office for National Statistics and academics.

Companies adopting the highest levels of diversity and inclusion also tend to have higher productivity and performance, which will be crucial through the difficult months ahead.

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According to McKinsey research, companies in the top quartile for gender diversity were 25 per cent more likely to experience above-average profitability. In the case of ethnic and cultural diversity, it found that the most diverse companies outperformed the least by a third in profitability.

Analysis by Boston Consulting Group showed a strong correlation between the diversity of management teams and overall innovation. Anthony Painter, of the Charted Management Institute, says that all its “evidence shows diverse organisations are best positioned to reap the benefits of higher productivity and better decision-making”.

The UK should be thinking about expanding reporting requirements to include mandatory ethnicity and disability pay gap reporting. Data is crucial for industry benchmarking, as well as for showing problems that need to be addressed.

Many companies are focusing on these areas because they see the benefits. They don’t need government guardrails when staff, customers and shareholders demand progress. But others could see a recession as an excuse to avoid action.

If the government cannot provide a lead in terms of progress on diversity and inclusion measures that work, then business must.

Wise managers think about what their successors would want them to do for their future, and not what they can do for short-term cash flow. The “anti-woke” group of MPs is right that money will be more constrained as the UK enters recession. But that makes focus on areas where progress can easily be lost more important if business is to emerge at its most productive and fair.

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