Last month, the Financial Reporting Council (FRC) announced that it will make two changes to the UK Corporate Governance Code in order to strengthen diversity in the boardroom.
The revised UK Corporate Governance Code, which came into effect in June 2010, included a new Principle B.2 which stated 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.” Later that year, Lord Davies was commissioned by the Government to review gender diversity on the boards of listed companies and recommend how the Government and businesses could increase the proportion of women on company boards.
Following the completion of his review in February 2011 – and the subsequent FRC consultation paper on his recommendations for revising the UK Corporate Governance Code to require listed companies to establish a policy on boardroom diversity in May 2011 – the following changes relating to listed companies were announced:
- They will have to report annually on their boardroom diversity policy, including gender, and on any measurable objectives that the board has set for implementing the policy and the progress it has made in achieving the objectives; and
- They will have to consider diversity of the board, including gender, when evaluating their board’s effectiveness.
These changes have been deferred and will apply to financial years beginning on or after 1 October 2012; however, the FRC has encouraged all companies to voluntarily apply and report on these changes with immediate effect.