The UK FCA takes significant backward step on LGBTQ+ Board Diversity
Statement on FCA policy statement (PS 22/3) — June, 2022
On 20 April 2022, the UK Financial Conduct Authority (FCA) announced new rules requiring listed companies to report information and disclose against targets regarding two underrepresented groups, women and ethnic minorities, on their boards and executive management.
On 28 July 2021, it had launched a consultation (CP21/24) on proposals to improve transparency for investors on the diversity of listed company boards and their executive management teams. The proposals fell short of including underrepresented groups beyond women and ethnic groups. We urged the FCA to reconsider this approach in comments submitted in October.
The FCA’s new rules are included in a policy statement (PS 22/3) summarizing feedback to the consultation proposals. The FCA unfortunately persists in excluding LGBTQ+ people. The policy is at odds with best practice set by the NASDAQ listing rules, approved by the Securities and Exchange Commission (“SEC”) last year which covers women, racial minorities, and LGBTQ+ individuals.
The FCA justifies going forward by arguing that there is not enough data to measure the extent of LGBTQ+ underrepresentation, apparently unaware that its new policy will perpetuate the problem. While there is a lack of data on LGBTQ+ executives sitting on UK boards, a gap the community is filling, the existing evidence points to an abysmal underrepresentation like that we observe in the US.
The decision by the FCA is a setback in a longer journey toward more efficient and inclusive corporate boards. Now is the time for UK companies to demonstrate their commitment to diversity, equity, and inclusion by accepting accountability and taking positive action through:
- Adopting formal board diversity policies and reporting guidelines that are inclusive of LGBTQ+ diversity
- Committing to seeking LGBTQ+ board members in every nominee search
- Leveraging community initiatives through sponsorship, joining the database, or seeking board-ready candidates from existing databases
- Championing the case for board diversity inside and outside of the business world
A renewed effort by regulators, shareholders and boards will enable companies to move forward in a meaningful evolution that supports business performance. Our efforts to make a more inclusive, equitable and diverse workplace start in the Boardroom. Our goal remains the same — to create a society where everyone feels that they belong and foster better economic outcomes.
Contact: Fabrice Houdart, Fabrice@outperformlgbt.com