With diversity & Inclusion (D&I) being an important part of the culture in any firm, the FCA have recently published their final policy statement in respect of D&I as set out in PS22/3 ‘Diversity and inclusion on company boards and executive committees’. The measures included in this document are set to improve the transparency on the diversity of company boards and their executive management for investors and other market participants.
It is always encouraging to know that the regulator is taking the role of purposeful and functional D&I seriously, and that they have taken the time to recognise that the importance of this ongoing implementation needs to start from the top of an organisation.
The FCA has made measures to introduce new ‘Listing Rules’ which now require firms to include in their financial reporting where they have their met diversity targets. In setting these new targets, the FCA are expecting firms to ‘comply or explain ‘should they have a lack of representation from women or people from a minority ethnic background, which in turn is designed to be a positive marker to encourage D&I at senior levels.
The list of companies who are in the scope on the new Listing Rules includes (extract from PS22/3) – ‘Overseas issuers with equity shares, or certificates representing equity shares, admitted to the premium or standard segment of the FCA’s Official List, excluding open-ended investment companies and ‘shell companies’ ‘. For the full description of companies included in this scope please refer the PS22/3.
The key requirements of the latest listing rules are as follows:
- At least 40% of the board are women (including those self-identifying as women)
- At least one of the senior board positions (Chair, Chief Executive Officer (CEO), Senior Independent Director (SID) or Chief Financial Officer (CFO)) is a woman (including those self-identifying as a woman).
- At least one member of the board is from a non-White ethnic minority background (as referenced in categories recommended by the Office for National Statistics (ONS)).
What is the FCA’s broader focus on diversity and inclusion?
Well, in addition to these new measures that have been laid out in the Policy Statement, the regulator has been looking at ways to further improve D&I in the financial services sector, which will push forward their objectives for greater consumer protection, increasing the integrity of the financial system and also promoting effective competition. This will also go on to support healthy cultures within firms and result in delivering higher standards of conduct, reduction of groupthink and facilitate effective decision-making practices.
The FCA are not the only regulator who is concentrating on the importance of D&I in the financial sector, the PRA and Bank of England recently joined forces with the FCA in writing the joint paper DP21/2: ‘Diversity and inclusion in the financial sector ‘which was published in July 2021. It was a unique opportunity for the regulators to have an open discussion on driving real change in D&I across the UK financial services and build on the other work the FCA is doing to deliver better outcomes for consumers across the board.
This joint piece of work set out to achieve four outcomes:
- supporting a healthy culture to deliver higher standards of conduct.
- reducing groupthink to support effective governance, challenge and decision making.
- promoting innovation and competition in products that cater for a diverse customer base.
- unlocking talent and making the UK market an attractive place to do business
So, I believe that the regulators message is clear – “Whether you’re the regulator or a regulated firm, diversity matters. A diversity of perspectives and thought, when part of an inclusive culture, results in better judgements and decision making in the public interest. It reduces the risk of groupthink and encourages innovation.”
After reading this blog you may be interesting in reading about Worksmart’s involvement in the furtherance of highlighting the importance of diversity and inclusion, as Business Development Manager Emma Howell judged PIMFA’s D&I awards in 2021. Read more here Shiny Shoes and Progressive People! PIMFA Diversity & Inclusion Awards 2021 – Worksmart