The UK’s Financial Conduct Authority has announced new diversity targets and associated disclosure requirements for UK companies. The updated rules increase the expectations for gender representation, and expand the field to cover leadership positions and other forms of diversity.

The FCA’s policy decision marks the next stage in the effort to promote corporate diversity and inclusion. Glass Lewis’ newly updated Gender Diversity in the FTSE 350 reviews the ground covered to date, providing background on the UK’s diversity push and extensive data on how it has impacted public company boards.

FCA’s Diversity and Inclusion Update

Last year, the UK regulator held a consultation on proposals to promote diversity and inclusion on public company boards (Glass Lewis’s response is available here). Now, the FCA has considered stakeholder feedback and announced its final proposals, which will apply for reporting periods starting on or after April 1, 2022.

Revised Board Diversity Targets

The following targets will apply, on a comply or explain basis:

  • At least 40% of the board are women.
  • At least one of the senior board positions (Chair, Chief Executive Officer (CEO),
  • Senior Independent Director (SID) or Chief Financial Officer (CFO)) is a woman.
  • At least one member of the board is from a minority ethnic background (which is defined by reference to categories recommended by the Office for National Statistics (ONS)) excluding those listed, by the ONS, as coming from a White ethnic background).

Expanded Disclosure Requirements

Public companies will be required to include a statement in their annual financial report setting out whether they have met specific board diversity targets, and to publish standardized numerical data on the sex or gender identity and ethnic diversity of their board, senior board positions (Chair, CEO, SID and CFO) and executive management.

The revised Listing Rules also expand existing reporting requirements to cover the diversity policies of key board committees and to indicate that reporting on board and board committee diversity policies could consider wider diversity characteristics.

While not required, each company is also encouraged to disclose:

  • a brief summary of any key policies, procedures and processes, and any wider context that it considers contributes to improving the diversity of its board and executive management.
  • any mitigating factors or circumstances which make achieving diversity on its board more challenging (for example, the size of the board or the country where its main operations are located).
  • any risks it foresees in being able to meet or continue to meet the board diversity targets in the next accounting period, or any plans to improve the diversity of its board.

An Overview of Gender Diversity in the FTSE 350

The FCA consultation and proposed rules come on the heels of the 2020 deadline for the achievement of the 33% women on boards target set by the prior Hampton-Alexander review. Last year, Glass Lewis provided a comprehensive overview of FTSE 350 compliance with the Hampton-Alexander targets, and now we have published an update covering changes in the past year.

Our Gender Diversity in the FTSE 350: 2022 Update features a wealth of three-year data and statistics on board composition, an outline of the background to progress against gender diversity initiatives in the UK to date; and a comparison of the UK gender diversity framework with that of its European equivalents. The paper concludes with an overview of what we anticipate to be the next phase in increasing gender diversity in the UK.

Gender Diversity in the FTSE 350: 2022 Update is available to Glass Lewis clients via Viewpoint or Governance Hub.

If you’re not a Glass Lewis client, the report is available on the Special Reports page. Or contact us to learn about our approach to board diversity, ESG issues and proxy voting:

GROW@glasslewis.com (Institutional Investors) | ENGAGE@glasslewis.com (Public Companies)