The Financial Conduct Authority (FCA) has published a consultation paper (CP21/24) on proposals to require premium and standard listed companies to make disclosures in relation to gender and ethnic diversity at board and executive management level.
The consultation follows the publication earlier this year of the five year summary report of the Hampton-Alexander Review on improving gender balance in FTSE companies (see our blog post here) and the 2021 update from the Parker Review on ethnic diversity on FTSE 100 boards (see our blog post here).
The FCA is seeking views on changes to the Listing Rules which would require premium and standard listed companies to include in their annual report and accounts a statement confirming whether they have met specified board diversity targets as at a date during the financial year of their choosing. The proposed targets are that:
- the board comprises at least 40% women;
- at least one of the positions of Chair, CEO, CFO or Senior Independent Director is occupied by a woman; and
- at least one member of the board is from a non-white ethnic minority background (as categorised by the UK Office for National Statistics).
Companies not meeting the specified targets would be required to explain the reasons why they have not been met.
In addition, premium and standard listed companies would be required to include data on the gender and ethnic diversity of members of their board and executive management.
There would be prescribed tabular forms for all of the proposed new disclosures.
In addition, the FCA is seeking views on expanding the current diversity policy-related disclosures required by Transparency Rules which were originally introduced as part of UK implementation of the EU Non-Financial Reporting Directive in 2017 (see our corporate e-bulletin here).
The proposed changes include adding ethnicity, sexual orientation, disability and socio-economic backgrounds to the aspects of diversity currently in DTR 7.2.8A R.
The consultation closes on 20 October 2021 and the FCA aims to publish final rules by the end of 2021. Any new disclosure requirements would apply to financial years starting on or after 1 January 2022.