UK Issues Gender/Ethnicity Targets for Top Executives and Boards

Last week, the UK Financial Conduct Authority (regulator similar to SEC) announced rules requiring U.K.-listed companies to meet diversity goals for executives and boards or explain why they will not. The rules are effective from April 1 with disclosure required starting in the second quarter of next year.

 The ‘comply or explain’ statement targets are as follows:

• At least 40% of the board should be women.  
  
  
• At least one of the senior executive/board positions (Chair, Chief Executive Officer (CEO), Chief Financial Officer (CFO) or Senior Independent Director (SID)) should be a woman.  
  
  
• At least one member of the board should be from an non-White ethnic minority background.

Alongside the narrative disclosure above, the new rules also require companies to disclose numerical data on the sex or gender identity and ethnic diversity of their board, senior board positions, and executive management in a standardized table.

 The most interesting aspect of the new rules is the requirement for at least one executive or board position to be a woman; this is not a requirement we have seen suggested by investors in the US (yet). FCA notes that companies that fail to comply with the new rules may lose attraction to certain funds; executive director of markets Sarah Pritchard stated that “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.”