Just 14 per cent of directors – executive and non-executive – of Britain’s 100 biggest companies are women. It now seems that both regulators and industry are keen to tackle what is seen as a major problem for governance and risk oversight.
On 11 October 2011 the FRC, the UK regulator responsible for corporate governance, announced its decision to amend the UK Corporate Governance Code to strengthen the principle on boardroom diversity which was first introduced into the Code in June 2010.
The amendments will apply for financial years beginning on or after 1 October 2012. They will require listed companies to report annually on their boardroom diversity policy, including gender, and on any measurable objectives they have set for implementing the policy and the progress made in achieving them. The FRC will also update the Code to include board diversity as one of the factors to be considered when evaluating its effectiveness.
Baroness Hogg, FRC Chairman, has said that “gender diversity strengthens board effectiveness by reducing the risk of ‘groupthink’”. The ABI agrees and has stated that better gender balance can achieve improved risk oversight and auditing standards. It is now pushing for an improvement to UK companies’ boardroom diversity. To move this agenda forward the ABI will host a number of meetings with UK investors and company boards to discuss strategies for improving board composition.
For those working in the regulated sector there are positive points to take away from both these announcements. First that some UK regulators are willing to consider a more flexible approach such as the ‘comply or explain’ model employed by the FRC and secondly, that industry has demonstrated its commitment to addressing the issue. By doing so both the regulator and the regulated can avoid the need for more cumbersome, inflexible and divisive legislation.