The Process: The UK’s Financial Conduct Authority, the regulatory organization responsible for overseeing the listing requirements of any entity listed on a UK securities exchange, issued the consultation on Thursday, July 28, 2021 with a three month public comment period. The FCA’s consultation amounts to a “proposed rule” which enables the agency to subsequently issue final listing standards which must be met by any entity listed on a foreign exchange.
The Proposed Requirements: There are three primary requirements being contemplated by the FCA:
- A “Comply or Explain Statement” on whether a company has achieved the proposed targets for gender and ethnic minority representation on the board;
- A narrative disclosure explaining key diversity and inclusion policies, processes, and any wider context relevant to the companies diversity experts at the board and executive management level; and
- Separate “standardized numerical disclosures” on both the ethnic and gender diversity of a company’s board, key board positions, and executive management team. A sample of the table is embedded below:
As for the targets and requirements, they are as follows:
- At least 40% of the board are women (including individuals self-identifying as women);
- At least one of the senior board positions (Chair, CEO, SID, or CFO) is held by a woman (or an individual self-identifying as a woman);
- At least one member of the board is from a non-white ethnic minority background (as categorized by the UK’s ONS).
Pursuant to the comply or explain statement, if a company has not met the targets, they must disclose what targets were not missed and the reasons for not meeting the targets.
The Outlook: Compared to the US, the UK is often more progressive with disclosures and listing standards. The US is slowly working its way towards some type of diversity disclosures, but the timeframe is unknown. It is not at all surprising to see the UK go forward with an official listing requirement. With the UK’s initiative out, however, US officials and interested parties will no doubt closely examine the content and strategy contemplated by the FCA.
HR Policy Global will monitor the proposal as it moves through the rulemaking process.
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