FCA implements new requirements for board and executive diversity reporting

27 April 2022

Macfarlanes' Corporate Law Update reported on the Financial Conduct Authority (FCA)’s recently-published policy statement on diversity and inclusion on company boards and in executive management. The statement was published further to the FCA's consultation in 2021 on mandatory diversity reporting for listed companies.

The new requirements apply to both UK and overseas issuers with a premium or standard listing of equity shares (or certificates representing equity shares). They do not apply to AIM companies.

The finalised rules demonstrate the FCA’s continuing commitment to secure better diversity in senior management for companies listed in London and represent a step in the right direction for more meaningful reporting to investors.

However, we already know that more than 70 FTSE 350 companies failed to meet 30% women on boards targets last year, so real change will require significant movement in their talent pipelines to meet the FCA’s 40% target anytime soon.

Explaining this seemingly common dilemma satisfactorily pursuant to the "comply or explain" approach in published annual statements will likely require significant thought and care.

As investors pay increasing attention to diversity at the top of the companies they invest in, enhancing transparency at Board and executive management level will help hold companies to account and drive further progress.