11 October 2011

FRC: Changes to UK Corporate Governance Code

The amendments the FRC is announcing will require listed companies to report annually on their boardroom diversity policy, including gender, and on any measurable objectives that the board has set for implementing the policy and the progress it had made in achieving the objectives. The FRC will also update the Code to include the diversity of the board, including gender, as one of the factors to be considered when evaluating its effectiveness.

The current revised Code, which came into effect in June 2010, included for the first time a principle recognising the value of diversity in the boardroom, which states that: “The search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender”.

In May 2011, the FRC issued a consultation document seeking views on whether the Code should be revised as recommended by Lord Davies of Abersoch in his review of the gender diversity of the boards of UK-listed companies published in February 2011. The vast majority of respondents supported the amendments proposed, which the FRC is now in the process of implementing.

The new provisions on diversity will apply to financial years beginning on or after 1 October 2012. This will provide the FRC with an opportunity to consult on other changes to reflect the current discussions around narrative reporting and effective company stewardship. However, the FRC strongly encourages all companies voluntarily to apply and report on the diversity additions to the Code with immediate effect.

Press release

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