The low level of female representation on listed company boards has been a concern for some years.

On 24 February 2011, Lord Davies published his “Women on Boards” report and the Financial Reporting Council (FRC) announced that it would consult on the recommendations addressed to the FRC in the report.

Please click here for the report and here for the FRC press release.

The independent review (commissioned and welcomed by the Coalition Government – please click here for the Department for Business Innovation & Skills press release) sets out the following recommendations to companies to increase the number of women on company boards:

  1. FTSE 100 companies should aim for a minimum of 25 per cent female board member representation by 2015 (although Lord Davies expects that many will achieve a higher proportion).
  2. The Chairmen of FTSE 350 companies should publish (by September 2011) the percentage of women they aim to have on their boards by 2013 and 2015 and this percentage should be reviewed by the Chief Executive of such companies.
  3. Quoted companies should disclose annually the proportion of women they have on their board, the number of women in senior executive positions in the company and the number of women employees in the organisation as a whole. Companies should report on these proportions in their 2012 Corporate Governance statement (whether or not changes are made).
  4. Chairmen will be encouraged to sign a charter in support of these recommendations (details of which have not yet been released).
  5. Chairmen should disclose meaningful information in the company’s annual report on the company’s appointment process and how it addresses diversity, including a description of the search and nominations process. The report notes that this is in line with the UK Corporate Governance Code (provision B2.4) which provides that “a separate section of the annual report should describe the work of the nomination committee, including the process it has used in relation to board appointments.”
  6. Investors are encouraged to pay close attention to these recommendations when considering company reporting and appointments to the board.
  7. Companies are encouraged to advertise non-executive board positions periodically to encourage greater diversity of applications.
  8. Headhunting firms should address gender diversity and best practice search criteria and processes relating to appointments to FTSE 350 boards in a voluntary code of conduct.

The report does not recommend quotas but says that the government reserves the right ‘to introduce more prescriptive alternatives if the recommended business-led approach does not achieve significant change’.

The report also recommends that the FRC should amend the UK Corporate Governance Code to require listed companies to establish a policy on boardroom diversity, including measurable objectives for implementing the policy, and that a summary of the policy should be disclosed annually together with details of the progress made in reaching the objectives.

The FRC has announced that it intends to consult on the recommendations made to the FRC in Lord Davies’ report, and whether to make further changes to the UK Corporate Governance Code to encourage companies to report on their policies concerning boardroom diversity. This consultation will focus upon whether these requirements would be appropriate, what form they should take, and the timetable for implementing any changes.

The Confederation of British Industry (CBI) has welcomed the proposal that FTSE 350 firms should set their own goals for female representation on their boards, rather being forced to comply with Government quotas. Please click here for the CBI press release.

At a European level, on 1 March, EU Justice Commissioner Viviane Reding met with the CEOs and chairmen of listed companies from 10 European countries to encourage an increase the number of women on company boards. Commissioner Reding called on listed companies to sign the “Women on Boards Pledge for Europe” and set goals to increase participation by women on boards to 30 per cent in 2015 and 40 per cent by 2020.

Please click here for the EU press release and here for the “Women on Board Pledge for Europe”.

Freshfields has recently held a series of three seminars on Women on Boards, covering directors’ duties and responsibilities, remuneration issues and managing compliance risk.