UK authorities launch consultation on boardroom diversity

The Financial Reporting Council, the UK’s corporate governance regulator, has launched a consultation on boardroom diversity.

It is seeking views on whether the Corporate Governance Code should be revised to require listed companies to publish boardroom gender diversity policies and report against them annually.

This was a key recommendation of a government-backed report from former Standard Chartered Chairman Lord Davies, whose report “Women on Boards” last February slammed the “glacial” progress in this area.

The FRC wants to make any changes quickly – in part to head off attempts at the European Union level to introduce quotas for women on boards.
“Early implementation might also help in the context of the debate taking place in Europe, by demonstrating a workable alternative to quotas,” the FRC says in the consultation document.

The European Union’s Justice Commissioner Viviane Reding has asked all companies to pledge to have at least 30% female board members by 2015 and 40% by 2020, while the Commission’s Green Paper oncorporate governance in April also raised the issue of diversity and gender balance.

The Davies report recommended that FTSE100 listed companies should be aiming for a minimum of 25% female board member representation by 2015 – although it stopped short of advocating strict quotas. In 2010 women made up only 12.5% of the board members of FTSE 100 companies.

The FRC said the UK government will consult separately on whether quoted firms should disclose the proportion of women on the board and in senior positions.

“Board diversity and effectiveness are closely linked,” said FRC Chairman Baroness Hogg. She said diversity “widens the perspectives” of decision-making and avoids ‘group think’.

The ‘comply-or-explain’ code sets out standards of good practice on board composition and development, remuneration, accountability and audit and relations with shareholders. It was already amended in June 2010 to include a reference to diversity although without an explicit disclosure requirement. The consultation closes on July 29.