FTSE 350 companies must improve reporting on diversity

The Financial Reporting Council (FRC) has published University of Exeter Business School research concerning the current extent and manner of reporting by FTSE 350 companies on diversity at board and senior management levels in their annual reports. It concludes that, although the majority of the UK’s largest companies have adopted policies on boardroom diversity, their reporting to stakeholders needs to improve. The research shows that only 15% of FTSE 100 companies fully complied with the current UK Corporate Governance Code’s (the Code) provision on diversity reporting by describing their policy on diversity, the process for board appointments, their objectives for implementing the policy, and progress on achieving them.

The report provides a snap shot of diversity reporting across the FTSE 350 (as at 1 March 2018) and shows how this has changed over time.

The analysis also shows that FTSE 350 companies’ approaches to diversity are wide ranging. In short, while some companies do demonstrate a deeper understanding of diversity as an issue of strategic importance, the great majority appear to treat reporting as a compliance exercise, suggesting a lack of commitment.

Other key findings include:

• 98% of FTSE 100 and 88% of FTSE 250 companies have a policy on board diversity—a considerable improvement since 2012 when this was first included in the Code

• however, just 15% of FTSE 100 companies report against all four measures stated within provision B.2.4 of the current Code

• some companies are embracing the spirit of diversity in their narrative reporting but many need to develop a clearer strategy to drive greater diversity at senior management level

UK Corporate Governance Code

The revised Code, which takes effect from 1 January 2019, requires improved reporting on diversity. In short, it calls on boards to include in their annual reports a description from their nomination committee of how they have applied the company’s diversity policy—including how this links to progress on achieving company objectives.

More specifically, the revised Code has a renewed emphasis on (i) succession planning and diversity reporting (ii) encouraging boards to think beyond gender diversity and (iii) ensuring appointment and succession planning practices promote diversity more broadly. The changes therefore encourage companies to build diversity across their workforces in order to feed the development of a diverse pipeline for succession to senior management.

Source: Report: Research shows that more companies should treat diversity as part of business strategy

Filed Under: News Analysis

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