‘Half of new senior leader appointments to listed companies should be women’

British businesses must act on corporate governance, executive pay and boardroom diversity to maintain the UK’s international standing in corporate governance and address a lack of trust of business amongst the public, according to a report from the Business, Energy and Industrial Strategy (BEIS) Committee.

The report calls for the Government to set a target that from May 2020 at least half of all new appointments to senior and executive management level positions in the FTSE 350 and all listed companies should be women and for companies to explain if they fail to achieve this ambition.

It also recommends a series of actions on executive pay, including a new and stronger voluntary code of governance for private companies and says companies should publish pay ratios between the CEO and both senior executives and all UK employees, and suggests workers be represented on remuneration committees and for the chairs of remuneration committees to be expected to resign if shareholders fail to approve the company’s pay policy. The report calls for companies to explain their pay policies better, including by publishing pay-ratios annually.

The Committee calls on the Financial Reporting Council to embed the promotion of the ethnic diversity of boards within its revised Code. It recommends that, at the very least, wherever there is a reference to gender, the FRC should include a reference to ethnicity, so that the issue of ethnic diversity on boards is made explicit in the revised Code, and is given as much prominence as gender diversity. It also recommends that the Government should legislate to ensure that all FTSE 100 companies and businesses publish their workforce data, broken down by ethnicity and by pay band.

Iain Wright MP, Chair of the Business Innovation and Skills Committee, said: “Too often in the wake of corporate failures we discover that directors, especially non-executives, have failed to provide sufficient challenge. Too often these individuals seem to be drawn from the same cosy club. We do not recommend tokenism, but we strongly believe a diverse board both better reflects the society in which the firm operates and provides greater challenge to the strategy and decisions taken, which should improve company performance and profitability.  We need greater diversity in our boardrooms, better training for directors, and more measures to enhance the executive pipeline, ensuring that talented people within an organisation are encouraged and supported at an early stage of their careers, and beyond, into middle and senior management.”

 



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