FCA sets diversity targets for listed company boards

Out-Law News | 10 May 2022 | 9:51 am |

Shuabe Shabudin tells HRNews about a new tool being developed to help firms improve diversity in their businesses  

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  • Transcript

    The FCA has finalised rules requiring UK listed companies to set out in their annual reports whether they have met board diversity targets. Firms will have to meet minimum targets for the representation of women and people from a minority ethnic background on their boards and in their senior executive teams, or explain why they have not done so. We’ll look at how you might do that. 

    Kate Dodd comments on this for Outlaw in: ‘FCA finalises ‘comply or explain’ diversity rules for listed companies’. She says the FCA’s focus on real-time data, as opposed to a historic emphasis on policies and mission statements, reflected wider trends. She says this applies at the most senior levels, with companies reporting a write down of equity by investors due to a failure to hit targets set by the Hampton-Alexander and Parker reviews on gender and ethnicity diversity respectively, and also at all levels, with customers and clients demanding clarity on the diversity of the teams who work on their accounts.

    Kate refers the ‘Black Lives Matter’ movement and how that has created a particular focus around race and ethnicity. She says employees and communities are turning to businesses to ask what tangible progress has been made as a result of the initiatives and statements of intentions given at the time. She says whilst it may have been convincing last year to say that progress ‘takes time’, there is no doubt that results will be expected by now, and that data will be needed to show that those results are more than just rhetoric.”

    Obviously the FCA’s rules relate specifically to the FS sector but drive for greater diversity is much the same across all sectors and we are seeing that right across our client base. Shuabe Shabudin has been helping a number of clients in this area and he joined me by video-link to discuss it, including a new diversity tool currently in development designed to help clients make progress:

    Shuabe Shabudin: “Yes, so we're seeing an increasing number of clients come to us to help them with that. Often its clients that we've worked with on their gender pay gap reporting, or their ethnicity pay gap reporting, and where those reports have come out with recommendations in relation to greater diversity and greater ethnicity and racial representation. So what we do is we use that information, the information has been collated as part of those reports, and often we'll also supplement that with one-to-ones with key stakeholders, or focus groups, and once we've got all of that good information we can feed that into what we've got as our benchmarking tool. It’s a wizzy piece of kit that, essentially, allows us to put all of the information in, understand where the company is now, work out what interventions there can be to get to the targets, or aspirations, they might have and then almost to chart and forecast what will happen if they undertake some or all of those interventions and we can look at that over different periods of time. So, it can be a two year outlook, a three year outlook, or a five year outlook. What that allows the company to do is to see what they need to do, most importantly, but equally as importantly, when and how, and how quickly, they need to be doing that in order to get to where they want to be. So, it's something that we're really seeing an increasing trend in and I think there's going to be more and more clients that are looking to do that because, as I say, there is now this spotlight being shone, there is a really good wave of positive action being undertaken. So, I think together we can really use the information, get more good information and data to chart correctly and accurately how we can get to the outcomes that we want.”

    Joe Glavina: “As I understand it, the product will work in a way that is tailored to the particular client. Is that right?”  

    Shuabe Shabudin: “Yes, I think what's really good about the tool is that it's bespoke.  So, obviously the background workings, the back office, is what it is, but it's bespoke in the sense that it doesn't push out one-size-fits-all solutions. The information is the organization's information, the key stakeholders are the key stakeholders of the company, so what we are able to give is, almost, I don't want to say fool proof, you know, it's tailored outcomes, it's tailored solutions, and it is specific to the organisation, the industry, the size of the organisation, all of those things. So look, if we're digging, we want to be digging in the right place. You know, if you're putting time and effort in, you, as a client, want to know that you're going to get the return on your investment. So we are much more confident that we're able to do that, given that the tool is so bespoke.”

    Joe Glavina: “So what’s your message to HR watching this programme?”

    Shuabe Shabudin: “I think it's to highlight to those that are in the key positions, those that are the decision makers or those that are creating the diversity and inclusion strategies, the values for the company, whatever it might be, that there is this tool available, that they don't need to go to something that's off the shelf, they can get this bespoke, tailored, advice and support and for us to work with them on how to get that data. We could do a whole session on how to collate the data in relation to equal opportunities and things but, you know, it's about knowing that they have that role and they can also, really helpfully, be the conduit between us and the individuals that are going to be making the decisions on how a company moves over the coming years.”

    That article on the FCA’s new rules is co-written by Kate Dodd and Tom Proverbs-Garbett. It’s called ‘FCA finalises ‘comply or explain’ diversity rules for listed companies’ and it’s available from the Outlaw website.