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The Financial Conduct Authority has published its new approach to diversity and inclusion at the top of financial companies which is based on firms meeting specific targets rather than quotas.
The Financial Conduct Authority has decided not to set mandatory quotas for women and those from a minority ethnic background but is asking London-listed companies to either comply or explain if they fail to reach the targets it has set.
The targets are that at least 40% of their board are women, at least one of the senior board positions is a woman and at least one member of the board is from an ethnic minority background.
If companies cannot meet the targets, they will need to explain why not. The FCA says this approach allows flexibility for smaller firms or those based overseas. The rules also allow companies to decide how best to collect data from employees to show they are meeting the targets.
The FCA has amended the terminology in its diversity rules to allow listed companies to include those self-identifying as women in its reporting and enable firms to choose whether they use sex or gender as the basis for reporting on workplace diversity.
The rules will apply to listed companies for financial accounting periods starting from 1st April 2022. The FCA will review the rules in three years’ time to make sure they are working and to check if the diversity targets are still appropriate.
Sarah Pritchard, Executive Director of Markets at the FCA which regulates the conduct of around 51,000 businesses and sets standards for around 18,000 firms, said: “As investors pay increasing attention to diversity at the top of the companies they invest in, enhancing transparency at Board and executive management level will help hold companies to account and drive further progress.”
Meanwhile, a coalition of 1,000 UK business leaders has urged ministers to overhaul company law to stop a repeat of the P&O Ferry scandal. They are calling on MPs to deliver a Better Business Act that would make environmental and social concerns equally important as delivering profit to investors. Retail expert Mary Portas, who is leading the group, said: “As things stand, the Companies Act still allows some companies to pursue profits at the expense of workers, communities and nature.” Pointing to the “horrendous behaviour” of P&O Ferry executives, she called for laws to be updated so “a decision like that can never be made in a British boardroom ever again.”