FCA consults on gender and ethnicity disclosure of boards and excos
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The Financial Conduct Authority has launched a consultation on proposals to improve transparency for investors on the diversity of listed company boards and their executive management teams, with the aim of issuing rules by late 2021.
The FCA is consulting on changing its Listing Rules to require listed companies to publish annually:
- a ‘comply or explain statement’ on whether they have achieved the proposed targets for gender and ethnic minority representation on their boards, which are to have 40% women, at least one woman in a senior board role (chair, CEO, CFO or SID) and at least one non-white board member; and
- data on the make-up of their board and most senior level of executive management in terms of gender and ethnicity.
The FCA is also proposing changes to its disclosure and transparency rules to require companies to ensure any existing disclosure on diversity policies addresses key board committees and also considers broader aspects of diversity, such as considerations of ethnicity, sexual orientation, disability, lower socio-economic background and other diversity characteristics.
The Listing Rule diversity targets are not mandatory to meet, the FCA emphasises, but supposed to act as a positive benchmark for issuers to report against. They will encompass UK listings by both UK and overseas companies.
The proposals would apply to UK and overseas companies with equity shares in either the premium or standard listing segments of the FCA’s Official List, while the disclosure and transparency changes apply to companies with securities traded on UK regulated markets, such as the Main Market of the London Stock Exchange.
"There is a current lack of standardised and mandatory transparency about diversity on listed company boards, particularly outside the FTSE 350 who do not provide data to the voluntary initiatives in this area. But interest from investors is growing and companies are increasingly focusing on this topic due to ESG investing, as well as wider social and public policy concerns," said Clare Cole, director of market oversight.
"Over time, we expect enhanced transparency may strengthen incentives for companies towards greater diversity on their boards and encourage a more strategic approach to diversity in their pipeline of talent. This may have broader benefits in terms of the quality of corporate governance and company performance in due course," she added.
The consultation follows a July discussion paper by the FCA that explored how to promote diversity and inclusion across the financial services sector as a whole. The regulator said diversity will be an ongoing focus for the FCA beyond the proposals set out on Wednesday.
The consultation is running for 12 weeks, until 22 October. Subject to consultation feedback and board approval, the FCA said it will seek to make relevant rules by late 2021.
