The Financial Conduct Authority (FCA) has finalised its rules requiring listed companies to hit diversity targets or explain why they have failed to meet them.
The regulator explained the rules will require firms to report information and disclose against targets on the representation of women and ethnic minorities on their boards and executive management so investors can easily see the diversity of their senior leadership teams.
The targets set are:
- that at least 40% of the board should be women;
- that at least one of the senior board positions (chairman, chief executive officer, chief financial officer or senior independent director) should be a woman;
- and that at least one member of the board should be from an ethnic minority background – excluding white ethnic groups.
The FCA revealed if firms cannot meet these targets they need to explain why they have failed to meet them, adding that this approach allowed flexibility for smaller firms or those based overseas.
The rules also allow companies to decide how best to collect data from employees to show they are meeting the targets.
While the rules apply to listed companies for financial accounting periods starting from 1 April 2022, the FCA added it will review the rules in three years’ time to make sure they are working and to check if the diversity targets are still appropriate.
Sarah Pritchard, executive director of markets at FCA, said: “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.”
