Should Boardroom diversity be represented in a Corporate Governance Code?

FRC asks for diversity opinions

The Financial Reporting Council (FRC) wants to know how boardroom diversity should be represented in the Corporate Governance Code.

The FRC’s consultation asks whether the Code should be revised to require listed companies to publish their policy on gender diversity in the boardroom and report against it annually, as was recommended in the Davies Review.

However, the reporting watchdog is also asking for further opinions on whether the Code should be revised ‘in order to help achieve more diverse and more effective boards’.  The FRC’s draft revision of provision B.2.4 of the Code reads:

‘A separate section of the annual report should describe the work of the nomination committee, including the process it has used in relation to board appointments. This section should include a description of the board’s policy on gender diversity in the boardroom, including any measurable objectives that it has set for implementing the policy, and progress on achieving the objectives. An explanation should be given if neither an external search consultancy nor open advertising has been used in the appointment of a chairman or a non-executive director.’

The FRC also seeks opinions on the creation of a new supporting principle in regard to diversity and board evaluation.

The Institute of Directors quickly responded to the consultation, arguing that ‘The Code already states that board candidates should be appointed on merit, against objective criteria and with regard for the benefits of diversity on the board, including gender.’

‘Further requirements in terms of gender diversity policy will increase the risk that the Code becomes viewed as a list of political requirements for listed companies rather than a guide to improved effectiveness.’

Chartered Secretary – The ICSA Magazine – 6 May 2011