Regulator wants to tighten rules on women in boardrooms

Companies with a lack of women in the boardroom may have to publicly explain their director selection policies in future.

Corporate regulators have started consultation on the move with a view to announcing a decision on any changes later in the year.

The consultation follows a report on women in the boardroom by Lord Davies in February that recommended the Financial Reporting Council (FRC) should update the UK Corporate Governance Code to require listed companies to publish their policy on gender diversity in the boardroom and report against it annually.

The FRC also wants to know whether the code should identify some of the factors boards should consider when they carry out effectiveness reviews.

FRC chair Baroness Hogg said: “Board diversity and effectiveness are closely linked. Diversity widens the perspectives brought to bear on decision-making, avoids too great a similarity of attitude and helps companies understand their customers and workforces. A board with too few women on it risks a weakness in at least one of these respects.

“It was these concerns that led us to add a reference to the benefits of diversity in general, with specific reference to gender, when the UK Corporate Governance Code was updated last year. As Lord Davies noted in his report, the rate of change in recent years has been glacial. That is why we are now responding to his proposal that boards should report on their gender diversity policy by consulting on whether it would be appropriate to add this to the Code.”

Consultation closes on July 29.

Download a copy of the consultation document from Consultation Document: Gender Diversity on Boards

The FRC is the UK’s independent regulator for promoting high quality corporate governance and reporting to foster investment.

The UK Corporate Governance Code sets out standards of good practice including on board composition, remuneration, accountability, audit and relations with shareholders.

All listed companies must report on how they have applied the code in their annual report and accounts.

The code was amended in June 2010 to state 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.”

What is diversity? See http://www.diversityleaders.org/our-services/what-is-diversity

Do you want more than what Diversity Training can deliver? See Diversity at Work in the workplace http://www.diversityleaders.org/our-services/training-a-events