Limited progress has so far been made in increasing the number of women in the boardroom, six months on from Lord Davies' independent review. However, there is continuing pressure for improvement and a number of Lord Davies' recommendations are being implemented.
Click here for our update on the Davies review.
A progress report published by Cranfield School of Management reveals that the proportion of women holding FTSE 100 board directorships is now 14.2%, up slightly from 12.5% last December. For FTSE 250 boards, the proportion has increased from 7.8% to 8.9% and, for the first time, it is a minority of FTSE 250 companies who have all-male boards.
However, the report also shows that only 33 FTSE 100 companies have heeded Lord Davies' recommendation to set themselves targets for the number of women they aim to have on their boards. Of these, only ten have set themselves targets of greater than a 10% increase. In the FTSE 250, just 17 companies have announced targets.
UK Corporate Governance Code
The Financial Reporting Council has announced two changes to the UK Corporate Governance Code relating to boardroom diversity, in response to Lord Davies' recommendations. Companies with a premium listing on the Official List must comply, or explain their non-compliance, with the Code and it represents best practice for other companies.
The last revision of the Code, in June 2010, recognised for the first time the value of diversity in the boardroom by introducing supporting principle B.2. This states that "the search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender".
Code provision B.2.4 currently provides for companies to include a separate section in their annual report describing the work of the nomination committee, including the process it has used in relation to board appointments. This provision is now being expanded to require the inclusion of a description of the board's policy on diversity, including gender, any measurable objectives that it has set for implementing the policy, and progress on achieving the objectives.
It should be noted that these Code requirements relate not just to gender, although this merits special mention, but to diversity generally.
The reference to measurable objectives is intended to discourage bland generic disclosures, but the new provision stops short of requiring that measurable objectives to be set for all aspects of diversity.
The second change to the Code is the introduction of a new supporting principle to principle B.6 on board evaluation. This will provide that the evaluation process should include consideration of the balance of skills, experience, independence and knowledge of the company on the board, its diversity, including gender, how the board works together as a unit, and other factors relevant to its effectiveness.
The new Code requirements will formally take effect for premium listed companies in accounting periods beginning on or after 1 October 2012, but companies are strongly encouraged to apply and report on the revised provisions with immediate effect.
Proposals on narrative reporting
In September 2011 the Department for Business, Innovation and Skills published a consultation document on narrative reporting which contained proposals to overhaul the current framework.
The proposals include the implementation of Lord Davies' recommendation that quoted companies should report on the proportion of women on the board, at senior executive level and across the organisation (where this information is available).
The Government's intention is that these proposals should take effect on 1 October 2012.
Executive search firms code of conduct
In July 2011, a number of executive search firms announced a voluntary code of conduct in response to another of Lord Davies' recommendations.
The code sets out seven key principles of best practice, ranging from action when accepting a boardroom brief through to induction. It also covers succession planning over the medium term, the setting of diversity goals, defining the client brief to ensure sufficient weight is given to relevant skills as well as corporate experience, the value of diverse long lists and support to candidates during the selection process.
Click here for the Financial Reporting Council's feedback statement: Gender diversity on boards.
Click here for the BIS consultation on the future of narrative reporting.
Click here for the executive search firms' voluntary code of conduct.
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This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.