The CBI has called for a “comply or explain” approach to changing the Corporate Governance Code in order to promote gender diversity on UK boards and is urging the Financial Reporting Council; to “get on” with amendments
The CBI today told the Financial Reporting Council (FRC) that it needs to speed up its resolution on updates to the UK’s Corporate Governance Code in order to give companies a clear direction for gender diversity strategy and target setting.
In May this year the FRC published a consultation document entitled Gender Diversity on Boards, and in response to the findings of this consultation CBI has today reiterated its advice that listed companies should required to adhere to a “comply or explain” code of practice in relation to board level diversity.
The CBI believes this approach would allow firms to set their own targets for increasing diversity that reflect the nature of their business and circumstances and explain why if they fail to deliver. In practice, that would mean a company employing a large number of female staff may choose to set a higher target, but the same target may not be realistic for a firm with fewer women employees.
Katja Hall, CBI Chief Policy Director, said:“The best way to get more women on boards is by giving companies the flexibility to set targets that reflect the realities of their businesses.
“The voluntary approach is working with the number of female boardroom appointments steadily increasing since the beginning of the year, but we need to keep up the momentum.” Hall added: “Given the scale of the challenge, the FRC should get on with revising the Code as a matter of urgency.”
What penalties might be imposed by a demonstrated failure to comply or to achieve internally set targets is unclear. Hall did go on to provide a spur for business leaders however saying: “Failure to act now could put firms at risk of Government or EU-imposed quotas, which would be little more than tokenism.”
Manufacturing was identified in a report published earlier this year by Lord Davies as being noticeably on the back foot with regards to gender diversity at board level. Plans to encourage the appointment of more talented women at this senior level will almost certainly target the sector.
Today is not the first time the CBI has set out its thoughts on gender diversity strategies. In December 2010 the organisation published Room at the Top ts recommendations to business for steps to be taken on improving gender diversity in a manner sensitive to the dynamics of the business. Briefly, these recommendations were:
•Harnessing the influence of the chairman. As well as setting the tone and culture of the board, the chairman should act as a mentor and advocate to female board candidates. The chairman’s role should also include encouraging women to take up non-executive directorship roles externally and shaping wider human resources policy at the company to support the female talent pipeline
• Improving transparency in board-level appointments, including requesting a diverse list of candidates from search consultants and considering skills acquired in non-linear career paths or less traditional roles
•Developing and sustaining the talent pipeline through to the boardroom, including ensuring women can see the path through operational and profit centre management roles; guiding employees on career choices and making the management of all talent a priority. This should go alongside the existing good practice of supporting women at natural break points in their careers, including returning from maternity leave; implementing flexible working policies; encouraging mentoring schemes and networking opportunities