Thursday, October 13, 2011 | Posted by: Ben Langford
Categories: Governance, Non-executive director | Tags: Board, boardroom, FTSE 350, women, women in business, diversity, gender, female, review, quotas, directors, representation, Lord Davies, Ben Langford, Davies report
Fresh changes to the UK Corporate Governance Code by the Financial Reporting Council (FRC) this week seek to “strengthen the principle of boardroom diversity” – and companies are being urged to respond rapidly.
The UK government’s response to the high-profile topic of board diversity was the Davies report, released in February 2011, giving UK plc one last chance to voluntarily improve the level of women on boards, with the implicit threat of legislative intervention if progress was not made.
FTSE 350 companies were required to set and disclose targets for 2015 (with a minimum target of 25% for the FTSE 100), reporting on steps taken and planned to achieve this, as well as on progress.
The 2011 Grant Thornton Corporate Governance review showed that gender diversity disclosures were poor with 72% of FTSE 350 companies (FTSE 100: 54%, Mid 250: 81%) failing to mention this topic at all in their annual report.
Of the remainder, just 19 companies (FTSE 100: 13, Mid 250: 6) provided the level of detail as envisaged by Lord Davies.
While these reports were largely drafted when the Davies report was released, this was already a high-profile topic and the disappointing results suggest that gender diversity is low down the boardroom agenda – especially in the smaller mid 250 companies where more than half of boards lack a single female member.
The FRC has this week [11 October 2011] agreed to amend the UK Corporate Governance Code in an attempt to give extra weight and substance to gender diversity disclosures.
In particular, the nomination committee is tasked with describing the board’s policy on diversity, measurable targets and progress on achieving these objectives. Diversity also becomes an explicit element of board evaluations. These amendments do not come into force until 1 October 2012, although early adoption as always is encouraged.
In Europe, a number of countries have already introduced mandatory quotas. The EU Justice Commissioner issued a voluntary request this summer for large European companies to sign a Women on the Board Pledge for Europe, committing themselves to achieve female board representation of 30% by 2015 and 40% by 2020.
There will be a progress review in March 2012, after which regulatory measures may be considered. Given the apparent low take-up it seems likely that there will be further European action on this issue.
This makes it doubly important for UK companies to be able demonstrate progress in improving the level of women on boards to avoid the mandatory quotas in force elsewhere.
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