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New diversity requirements for senior executives and board members at UK listed companies

The Financial Conduct Authority (FCA) has published a policy statement confirming its intention to adopt previously-announced proposals relating to diversity at board level of listed companies.

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Published 22 April 2022

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Almost all UK and overseas companies which are listed on a regulated market in the UK will be required to ‘comply or explain’ in relation to their adherence to the target measures outlined in the rules. Amongst the key targets to be adopted:

  • at least 40% of board members to be women;
  • at least one member of the board to be from a non-white ethnic minority background (based on ONS categories); and
  • at least one senior board position (Chair, CEO, CFO or Senior Independent Director) to be held by a woman.

Affected companies must disclose their efforts to achieve the targets and other relevant data in their annual financial report.

The new rules will be in effect from the financial year starting in April 2022, although earlier voluntary reporting is encouraged. The FCA has decided not to extend reporting requirements to other categories such as sexual orientation or socio-economic background for the time being, although again firms are encouraged to report voluntarily on wider diversity measures in an appropriate manner.

The measures are designed to improve transparency for investors on the diversity of boards and executive management and – indirectly through investor pressure – to encourage companies to develop and promote a diverse workforce at the most senior levels.

Any company that fails to meet the targets set by the FCA must explain why in their annual financial report.

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Shorter Reads

New diversity requirements for senior executives and board members at UK listed companies

The Financial Conduct Authority (FCA) has published a policy statement confirming its intention to adopt previously-announced proposals relating to diversity at board level of listed companies.

Published 22 April 2022

Associated sectors / services

  • Employment law for employers

Authors

Almost all UK and overseas companies which are listed on a regulated market in the UK will be required to ‘comply or explain’ in relation to their adherence to the target measures outlined in the rules. Amongst the key targets to be adopted:

  • at least 40% of board members to be women;
  • at least one member of the board to be from a non-white ethnic minority background (based on ONS categories); and
  • at least one senior board position (Chair, CEO, CFO or Senior Independent Director) to be held by a woman.

Affected companies must disclose their efforts to achieve the targets and other relevant data in their annual financial report.

The new rules will be in effect from the financial year starting in April 2022, although earlier voluntary reporting is encouraged. The FCA has decided not to extend reporting requirements to other categories such as sexual orientation or socio-economic background for the time being, although again firms are encouraged to report voluntarily on wider diversity measures in an appropriate manner.

The measures are designed to improve transparency for investors on the diversity of boards and executive management and – indirectly through investor pressure – to encourage companies to develop and promote a diverse workforce at the most senior levels.

Any company that fails to meet the targets set by the FCA must explain why in their annual financial report.

Associated sectors / services

  • Employment law for employers

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