Financial Reporting Council consults on Boardroom Diversity
News types: Consultation Announcement
Published: 5 May 2011
The Financial Reporting Council (FRC) has begun consultation on whether the UK Corporate Governance Code should be revised to require listed companies to publish their policy on gender diversity in the boardroom and report against it annually. This was a recommendation in Lord Davies’ report, “Women on Boards”, which was published in February.
Read the Consultation Document: Gender Diversity on Boards.
Views are also sought on whether the Code should identify some of the key issues to be considered when boards carry out their regular effectiveness reviews, and on the timing of any changes that might be made to the Code as a result of the consultation.
Introducing the consultation document, FRC Chairman Baroness Hogg said:
“Board diversity and effectiveness are closely linked. Diversity widens the perspectives brought to bear on decision-making, avoids too great a similarity of attitude and helps companies understand their customers and workforces. A board with too few women on it risks a weakness in at least one of these respects.”
“It was these concerns that led us to add a reference to the benefits of diversity in general, with specific reference to gender, when the UK Corporate Governance Code was updated last year. But as Lord Davies noted in his report, the rate of change in recent years has been glacial. That is why we are now responding to his proposal that boards should report on their gender diversity policy by consulting on whether it would be appropriate to add this to the Code.”
Consultation closes on 29 July 2011. A decision on whether to amend the Code and, if so, the timetable for doing so, will be announced later in the year.
Notes to Editors
- The Financial Reporting Council is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.
- The UK Corporate Governance Code sets out standards of good practice including on board composition and development, remuneration, accountability and audit and relations with shareholders. All companies with a Premium Listing of equity shares are required under the Listing Rules to report on how they have applied the Code in their annual report and accounts, and either to confirm that they have complied with the Code's provisions or - where they have not - to provide an explanation (known as “comply or explain”).
- The Code was amended in June 2010 to state that “the search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender.” There is no explicit disclosure requirement related to this recommendation.
- In his report on women on boards (February 2011), Lord Davies recommended that “the Financial Reporting Council should amend the UK Corporate Governance Code to require listed companies to establish a policy concerning boardroom diversity, including measurable objectives for implementing the policy, and disclose annually a summary of the policy and progress made in achieving the objectives”.