Diversity rules added to UK Governance Code

From 1 October 2012 companies will be required to report on how they address issues of diversity in the boardroom.  As a result of its consultation on how best to recognise the value of diversity in the boardroom, the Financial Reporting Council (FRC) is planning to alter the UK Corporate Governance Code in 2012.

Though the FRC proposed a number of possible changes in its consultation document, the new wording affects only two sections of the Code. It should be noted that no further guidance on the new provision will be issued – the FRC considers that existing guidance on board effectiveness will be sufficient.

The changes are as follows with new material in bold:

‘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 diversity, including gender, 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.

Additionally, supporting principle B.2.4 now reads with new material in bold:

‘Evaluation of the board should consider the balance of skills, experience, independence and knowledge of the company on the board, its diversity, including gender, how the board works together as a unit, and other factors relevant to its effectiveness.’ Presented by ICSA UK on 11 October 2011.