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Research shows that more companies should treat diversity as part of Business Strategy

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  • Corporate Governance  Image

28 Sep 2018

Research conducted for the Financial Reporting Council (FRC) by the University of Exeter Business School found that the majority of the UK’s largest companies have adopted policies on boardroom diversity, but their reporting to stakeholders needs to improve.

The research, which focused on reporting by the FTSE 350, shows that only 15% of FTSE 100 companies fully complied with the UK Corporate Governance Code’s provision on diversity reporting by describing their policy on diversity, the process for board appointments, their objectives in implementing the diversity policy and the progress on achieving these objectives. Furthermore, whilst some FTSE 350 companies demonstrate an understanding of diversity as an issue of strategic importance, the majority of companies appear to treat reporting as a mere compliance exercise.

The key findings include:

  • 98% of FTSE 100 and 88% of FTSE 250 companies disclosed a policy on board diversity, a considerable improvement since 2012 when this disclosure requirement was first included in the UK Corporate Governance Code.
  • 15% of FTSE 100 companies report against all four measures stated within provision B.2.4 of the current UK Corporate Governance Code which include describing their policy on diversity, the process for board appointments, their objectives in implementing the diversity policy and the progress on achieving these objectives.
  • Some companies are embracing the spirit of diversity in their narrative reporting but many need to develop and disclose a clearer strategy to drive greater diversity at senior management level.

The revised 2018 UK Corporate Governance Code, which takes effect from 1 January 2019, requires improved reporting on diversity. Provision 23 calls on boards to include in their annual reports a description of the work of the nomination committee, including the way they have implemented the company’s diversity policy and how this links to progress on achieving the objectives of the diversity policy. The 2018 Code emphasises succession planning and diversity reporting, encouraging companies to build a diverse pipeline for succession to senior management.

Please click here to access the article on the FRC’s website.

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