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The majority of the UK’s largest companies have adopted policies on boardroom diversity but for many the reporting to stakeholders suggests a tick box approach with no clear strategy for improvement, according to a new study.
Research conducted for the Financial Reporting Council (FRC) by the University of Exeter Business Schools hows that only 15% of FTSE100 companies fully complied with the UK Corporate Governance Code’s provision on diversity reporting by describing their policy on diversity, the process for board appointments, their objectives for implementing the policy and progress on achieving them.
The Board Diversity Reporting in 2018 report says that FTSE 350 companies’ approaches to diversity are wide ranging and that, while some do demonstrate a deeper understanding of diversity as an issue of strategic importance, the great majority appear to treat reporting as a compliance exercise. It says this suggests “a lack of commitment”.
The revised UK Corporate Governance Code, which takes effect from 1 January 2019, requires improved reporting on diversity. It calls on boards to include in their annual reports a description from their nomination committee of how they have applied the company’s diversity policy, including how this links to progress on achieving company objectives.
The revised Code has a renewed emphasis on succession planning and diversity reporting, encourages boards to think beyond gender diversity and to act to ensure appointment and succession planning practices promote diversity more broadly. The FRC says the changes encourage companies to build diversity across their workforces to feed the development of a diverse pipeline for succession to senior management.
The key findings of the research include the fact that 98% of FTSE 100 and 88% of FTSE 250 companies have a policy on board diversity, but just 15% of FTSE 100 companies report against all four measures stated within provision B.2.4 of the current UK Corporate Governance Code.
Tracy Vegro, FRC Executive Director of Strategy and Resources, said: “There is almost universal acceptance that diversity contributes to more effective decision-making and mitigates the danger of group think. Some of the findings of this report are disappointing and FTSE 350 companies should provide fuller disclosures on all diversity.
“We expected to see more of our largest companies providing greater information about their approach to boardroom diversity and insights on the actions they are taking to increase diversity at all levels, particularly those in the current UK Corporate Governance Code. To maintain a competitive edge and success over the long-term, UK companies need to consider how diversity and inclusion is relevant to the markets in which they operate, all their stakeholders and the communities they serve.
We are writing to companies to challenge them to take a more strategic approach to diversity and inclusion, and to consider their approach to reporting on it.”