UK Regulator Sets Diversity Targets for Top Executives, Boards

The Financial Conduct Authority has set UK-listed companies three diversity targets, including a goal for at least 40% women on their boards, in the latest move to bolster diversity in the upper ranks of British business.

Companies should also have at least one woman in the role of chief executive officer, chief financial officer or senior independent director, the FCA said in a statement Wednesday. And at least one member of the board should be from an ethnic minority background, excluding white ethnic groups.

The watchdog said firms should publish this information in their annual financial reports, and if they do not meet the targets will be required to explain why. The rules will apply for accounting periods starting from April 1, 2022, meaning they will start to appear in reports from the second quarter of next year.

“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,” said Sarah Pritchard, executive director of markets at the FCA.

The regulator’s policy follows a consultation last year and several warnings that the FCA would be shining a light on how firms are increasing diversity. The percentage of women in FTSE 100 boards is 38% and the parallel figure for FTSE 250 boards is 35%, according to a study last year by Cranfield School of Management

The reporting obligation will be included in the UK’s Listing Rules. It comes after various initiatives to promote diversity within companies, including the Hampton Alexander Review and the Parker Review.

Photograph: Commuters make their way into the city of London during the morning rush hour in London, UK, on Monday, April 11, 2022. Photo credit: Chris J. Ratcliffe/Bloomberg