In light of the continuing slow progress towards greater board diversity, Lord Davies of Abersoch was invited by the Government to review the current position, identify barriers to women reaching the boardroom and make recommendations about how government and business can increase the proportion of women on boards.
Lord Davies' report, published in February 2011, analyses the business case for gender diversity, current barriers to achieving diversity and the approach taken in other jurisdictions.
The Davies report contains a series of recommendations to achieve a step change in the current position:
- in its key recommendation, the report rejects quotas (although says that this should be kept in reserve by the government if there is no significant change going forward). Instead, the report recommends that FTSE companies should set public targets for women on boards. All chairmen of FTSE 350 companies should announce by September 2011 the percentage of women they aim to have on their boards in 2013 and 2015. FTSE 100 boards should aim for a minimum of 25% female representation by 2015;
- quoted companies should be required to disclose, on an annual basis, the proportion of women on the board, women in senior executive positions and female employees in the whole organisation;
- the FRC should amend the Corporate Governance Code to require listed companies to establish a policy concerning boardroom diversity and disclose annually a summary of the policy and the progress made in its objectives; and
- headhunters should draw up a voluntary code of conduct addressing gender diversity and best practice for FTSE 350 board level appointments.
A steering board headed by Lord Davies will meet every six months to consider progress against these measures and will report annually with an assessment of whether sufficient progress is being made.
The Davies report is available on the BIS website.
Following the Davies Report, the Financial Reporting Council published a consultation paper in May 2011 on possible changes to the UK Corporate Governance Code in relation to gender diversity on boards.
In its consultation paper, the FRC asks for views on whether:
- changes should be made to the Governance Code in line with Lord Davies’ recommendation, or whether the new principle in the Governance Code of considering the benefits of gender mix when making appointments should be allowed more time to bed down;
- if changes are made to the Governance Code, the recommendation should be implemented by expanding the disclosures required to be made in the annual report in relation to the work of the nomination committee (provision B.2.4);
- the Governance Code should set out some key elements which should be included in a listed company’s gender diversity policy; and
- a new supporting principle should be included in the section of the Governance Code on evaluation (Code Principle B.6) setting out factors which should be considered as part of the board’s evaluation, including the board’s gender diversity policy.
The FRC is also asking for views on when any changes to the Governance Code should come into effect. The consultation notes that the Government will be issuing a separate consultation on the Davies Review recommendation that companies should disclose annually the proportion of women on the board, in senior executive positions and in the organisation as a whole.
The consultation paper, which asks for views by 29 July 2011, is available from the FRC website.