The Financial Conduct Authority’s (FCA) new listing rules could encourage a greater gender balance among the C-suite of FTSE All-share ex350 companies after new research finds “too slow” progress among smaller listed firms, predict market participants.
Larger listed firms are expected to disclose greater levels of company information around diversity and inclusion to satisfy investors, customers and future employees in comparison to smaller firms which often fall short of the main scope of investor and regulatory scrutiny, explains Janet Barberis, managing director at Protiviti.
“[Larger firms] are more in the spotlight whereas those outside of [FTSE 350] have not had as much scrutiny on them, says Barberis. “You could argue […] as they haven’t needed to publish their figures, they haven’t needed to focus on [diversity] to the same degree.”
The lack of “transparency and focus” required by smaller firms may have contributed to the startling difference of gender parity between FTSE 350 and FTSE ex350 companies, she says.
As it stands, 50% of UK firms in FTSE All-share ex350 do not have any women in C-Suite positions, according to a recent report by Women on Boards UK and Protiviti. This figure is down slightly from 54% recorded in 2021.
In contrast, only 16 firms (4.6%) in the FTSE 350 have failed to make progress in improving gender diversity at the executive leadership level.
“This is an appalling statistic and the pace of change is too slow,” says Moira Hindson, head of forensic accounting services, ethics partner at Moore Kingston Smith.
“There will always be competing issues for Boards to focus on, but the past three years have been exceptional in this context. When surrounded by uncertainty, people often stick to what they know rather than push for greater challenges. I hope that with new ways of working, the opportunities for businesses to become more diverse at this level, and the pace of change, will increase.”
However, Protiviti’s Barberis is conscious of the use of tokenism among firms “just to fit a quota”. Instead, firms should “embed diversity” throughout the organisation allowing them to attract and nurture future talent that encourages further diversity.
New diversity disclosures
In April, the FCA published new rules requiring listed firms to report information and disclose against targets on the representation of women and ethnic minorities on their boards and executive management.
Starting from this year’s financial accounting period, firms will need to ‘comply or explain’ why they have not met the regulator’s targets.
“As investors pay increasing attention to diversity at the top of the companies they invest in, enhancing transparency at Board and executive management level will help hold companies to account and drive further progress,” said Sarah Pritchard, executive director of markets at the FCA, in a statement.
The ‘comply or explain’ approach allows some flexibility for companies while encouraging them to meet diversity targets, says Hindson.
“It will force them to at least articulate why they cannot meet these targets and hopefully a significant number will conclude that it’s easier to take the appropriate steps towards meeting them, rather than have to explain why they cannot do so.
“In the end, they will reap the benefits that come with being a diverse organisation.”