The UK’s financial watchdog is seeking to implement new rules that will force listed companies to disclose their c-suite diversity credentials, it announced today.
The Financial Conduct Authority is seeking feedback from firms on proposed rules that will see listed companies publish a “comply or explain” statement breaking down whether they have reached proposed diversity targets.
As part of the changes, the FCA is proposing the proportion of listed companies’ boards should be at least 40 per cent female. At least one of the senior board positions – either chair, chief executive officer, chief financial officer and senior independent director – should be held by a woman.
Delphine Currie, partner at law firm Reed Smith, said: “Whilst some may have preferred the FCA to adopt a stick rather than carrot approach, the “comply or explain” regime has proved to be very effective in terms of corporate governance more generally, with many investors voting with their pockets and not investing in companies which fail to comply.”
The FCA is intending to implement the proposals by late 2021. It is consulting on them until 22 October of this year.
If listed companies fail to comply with the targets, they will need to explain to shareholders why they have not done so.
Clare Cole, director of market oversight at the FCA, said: “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.”
“Our proposals are intended to increase transparency by establishing better, comparable information on the diversity of companies’ boards and executive committees.”
“This will provide better data for companies and investors to assess progress in these areas and make investment decisions, reduce investor search costs, and inform shareholder engagement, enhancing market integrity.”
Although not mandatory under the Listing Rule regime, the new measures, if implemented, will provide a benchmark for companies to report against, the FCA said.
The move comes as the FCA announced on Tuesday it is to ease the listing regime to attract more SPACs to float on the London market.