INVESTORS HAVE warned companies to improve ethnic and gender diversity on their boards in preparation of the annual meeting season.

The UK’s biggest 350 listed firms will receive “amber-top” warnings – the second-highest level of alert – from the Investment Association (IA) if they fail to provide information on diversity on their boards.

They can also expect to continue to receive warnings if they do not have a credible action plan in place to tackle the issue of ethnicity.

The advisory group represents 250 members and aims to use the voting power of their members to encourage listed companies to adopt the Parker Review target.

This would mean having at least one director from an ethnic minority background in their companies by the end of 2021.

Andrew Ninian, the IA’s director for stewardship and corporate governance, said: “The UK’s boardrooms need to reflect the diversity of modern-day Britain.

“With three-quarters of FTSE-100 companies failing to report the ethnic makeup of their boards in last year’s AGM season, investors are now calling on companies to take decisive action to meet the Parker Review targets.”

The advisory groups also continue to advocate for gender diversity by issuing red alert warnings to companies with 30% or fewer female directors.

In regard to executive pay, the group also detailed that companies that have received government support or raised capital from shareholders during the pandemic should not pay annual bonuses.

Multiple firms have since benefitted from the government’s furlough scheme or the business loan schemes.

Between March and November last year, 73 firms out of the 600-strong FTSE all-share index raised fresh funds from investors.

“Investors also do not generally expect bonuses to be paid if a company has taken government or shareholder support – any company that chooses to do so is expected to provide a clear rationale,” said the IA’s director for stewardship and corporate governance.