“A range of research…positively associates gender-diverse boards with improved performance”
Lord Davies has produced his review of “Women on boards” (the Review). The Review is the result of the Government’s invitation to Lord Davies to identify the barriers preventing more women reaching the boardroom and to make recommendations regarding what government and business could do to increase the proportion of women on corporate boards. The Review, which concentrates on listed companies, can be read here.
Lord Davies makes 10 recommendations, a summary of which can be at pages 4 and 5 of the Review. The recommendations on targets and on disclosure are most relevant from a corporate law perspective.
Recommendations: Target for FTSE 100 companies, stated aims for all FTSE 350 companies
The Review does not recommend the imposition of fixed quotas to increase the number of women on boards. Instead, it gives this target for FTSE 100 companies:
- FTSE 100 boards should aim for a minimum of 25% female representation by 2015. (In 2010, the figure was 12.5%.)
The chairmen of FTSE 350 companies should set out the percentage of women they aim to have on their boards in 2013 and 2015. These “aspirational goals” should be announced by September 2011.
The Review expects all chief executives (of FTSE 350 companies) to review the percentage of women they aim to have on their executives committees in 2013 and 2015.
Recommendations: Disclosure
The recommendations place a particular emphasis on the use of disclosure:
- Quoted companies should be required to disclose each year the proportion of women on the board, women in “senior executive” positions and female employees in the whole organisation. Presumably this disclosure will be made in the annual report.
- The Financial Reporting Council (the FRC) should amend the UK Corporate Governance Code to require listed companies to establish ”a policy concerning boardroom diversity, including measurable objectives for implementing the policy, and disclose annually a summary of the policy and the progress made in achieving the objectives”.
- Companies should report on all the above matters in their 2012 “Corporate Governance Statement”, whether or not the underlying regulatory changes are in place.
- The section of the annual report which describes the work of the nomination committee should “disclose meaningful information about the company’s appointment process…including a description of the search and nomination process”.
Reaction
The FRC will be consulting on the Review’s recommendation at 2. above. The Government’s welcome of the Review, and various comment from the FRC, the Equality and Human Rights Commission and the 30% Club, can be read here.
Update 11 October 2011: The FRC has now consulted on these recommendations and has confirmed its changes to the UK Corporate Governance Code and stated that companies should apply and report on the changes with immediate effect – see this post.
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