The FCA has launched a consultation on proposals to improve transparency for investors on the diversity of listed company boards and their executive management teams.

If ratified, the rules would require companies to publish annually a ‘comply or explain statement’ on whether they have achieved certain proposed targets for gender and ethnic minority representation on their boards, and data on the make-up of their board and most senior level of executive management in terms of gender and ethnicity.

The FCA is also proposing changes to its disclosure and transparency rules to require companies to ensure any existing disclosure on diversity policies addresses key board committees and also considers broader aspects of diversity. This could include, for example, considerations of ethnicity, sexual orientation, disability, lower socio-economic background and other diversity characteristics.

The diversity targets are not mandatory for companies to meet, so the FCA is not setting ‘quotas’, but providing a positive benchmark for issuers to report against. The proposals would apply to UK and overseas companies with equity shares in either the premium or standard listing segments of the FCA’s Official List, while the disclosure and transparency changes apply to companies with securities traded on UK regulated markets, such as the Main Market of the London Stock Exchange.

The ‘comply or explain’ statement targets include at least 40 per cent of the board should be women (including those self-identifying as women), at least one of the senior board positions should be a woman and at least one member of the board should be from a non-white ethnic minority background.

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