Board diversity policies have now been adopted by 98 per cent of FTSE 100 companies and 88 per cent of those in the FTSE 250 group, a government regulator has reported.
The figures represent a “considerable improvement” since 2012 when this requirement was included in the UK Corporate Governance Code, which establishes good conduct principles for London Stock Exchange companies.
The research was carried out by Exeter University business school for the Financial Reporting Council, the government regulator that promotes high-quality corporate governance and reporting in order to encourage investment.
The investigators observed that although most of the UK’s largest companies had adopted boardroom diversity policies aimed at making positions available to employees from both genders and from all ethnic and social backgrounds, their reporting to stakeholders was inadequate.
They regretted that only 15 per cent of FTSE 100 companies complied fully with the code’s diversity principles. Many failed to describe their diversity policy, their board appointments process, their objectives for implementing the policy, and progress on achieving them.
Among FTSE 250 companies the researchers found a minority regarded diversity as having strategic importance, but the vast majority appeared to treat reporting on it as a box-ticking exercise, betraying a lack of commitment.
The report could be a wake-up call for slacker companies. From January a revised version of the code will insist that annual board reports detail how companies have applied their diversity policies and how this influences progress towards corporate objectives.
The revised code encourages directors to ensure that appointment and succession planning promotes diversity more broadly. This means workforce-wide diversity giving employees of all backgrounds opportunities to become senior managers.
Another observation from the report is that many companies may need to formulate clearer policies on senior management diversity.
The advice to the not fully compliant 15 per cent is that they should describe the work of their nomination committees, including the board appointments process, and should explain the board diversity policy, what measurable objectives there are for implementing it, and what progress is being made.
Companies are told too that the appointment of chairmen or non-executive directors should be transparent and that they should state whether search consultancies, if used, have connections with them.
Tracy Vegro, the Financial Reporting Council’s executive director of strategy and resources, said: “There is almost universal acceptance that diversity contributes to more effective decision-making and mitigates the danger of group think.
“Some of the findings of this report are disappointing, and FTSE 350 companies should provide fuller disclosure on all diversity.
“We expected to see more of our largest companies providing information about their approach to boardroom diversity and insights on the actions they are taking to increase diversity at all levels, particularly those in the current UK Corporate Governance Code.
“To maintain a competitive edge and success over the long term, UK companies need to consider how diversity and inclusion are relevant to the markets in which they operate, all their stakeholders and the communities they serve.
“We are writing to companies to challenge them to take a more strategic approach to diversity and inclusion, and to consider their approach to reporting on it.”
Victoria Atkins, the Minister for Women, commented: “It is essential that we maximise the contribution that women make to our economy. If we want our organisations or projects to succeed, we had better include women.
“There are more women in work than ever before, more women-led businesses, more women on FTSE boards, and more female MPs than ever before.
“In 2017 we introduced ground-breaking regulations requiring large companies to publish their gender pay gaps. But only about a quarter of FTSE 350 board positions are occupied by women, with eight all-male boards still existing.
“We must continue to show that in today’s fast-paced competitive market we are driving towards diversity in boardrooms.”
John Howell, Chief of Thought Leadership and Editorial Director, is a co-founder of 3BL Media, the parent company of Triple Pundit, begun in 2009. Howell oversees original editorial content procurement and creation. He is also the author of the weekly Brands Taking Stands Newsletter. He has written and edited for Elle, Artforum, High Times, the New York Times Magazine, and the LA Times. Howell is based in Wonalancet, NH.