17 September 2021

FCA consultation

The FCA is consulting on the introduction of new diversity related disclosures by listed companies (premium and standard listed). The consultation paper is available at CP21/24: Diversity and inclusion on company boards (fca.org.uk).


There are two key proposals. The first involves a new requirement for listed companies to disclose publicly in their annual financial report whether they meet certain specific board diversity targets on a 'comply or explain' basis. The second proposal will, if implemented, require listed companies to publish standardised data in their annual financial report on the composition of their board and the most senior level of executive management by gender and ethnicity.

In addition, the proposals also envisage amending the existing reporting requirements on board diversity policies set out in DTR 7.2.8AR. These are likely to involve:

  • extending the disclosures to the remuneration, audit and nomination committees of a listed company and
  • adding ethnicity, sexual orientation, disability and socio-economic backgrounds to the aspects of diversity covered by a company’s diversity policy

The proposals build on previous initiatives to improve board diversity including the Hampton-Alexander Review and the Parker Review.

What are the proposed board diversity targets?

The FCA has proposed the following targets on board diversity:

  • at least 40 per cent of the individuals on the board should be women
  • at least one of the Chair, the CEO, the CFO or the Senior Independent Director should be a woman and
  • at least one individual on the board should be from a non-white ethnic minority background (as referenced in categories recommended by the UK’s Office for National Statistics)

If a listed company has not met all of these targets, it will be required to identify the targets which it has missed and explain why those targets have not been met.

References to women will include those self-identifying as women.

What gender and ethnicity disclosures will be required?

The listed company’s annual financial report must include numerical data on the gender and ethnic diversity of the individuals on its board and in its executive management. There will be a prescribed format for these disclosures. The FCA notes that 'its proposals are intended to increase transparency by establishing better, comparable information on the diversity of companies’ boards and executive management'. This is intended to provide improved data for companies and investors to assess progress in these areas and should inform shareholder engagement and investment decisions, thereby enhancing market integrity.

Executive management

The FCA has suggested that a listed company’s executive management will consist of:

  • its executive committee or
  • the most senior executive or managerial body below the board (or where there is no such formal committee or body, the most senior level of managers reporting to the chief executive) including the company secretary but excluding administrative and support staff

Which companies are within the scope of the proposed changes?

The proposed changes to the listing rules will apply to UK and overseas issuers with equity shares, or certificates representing equity shares, admitted to the premium or standard segment of the FCA’s Official List. Open-ended investment companies and 'shell companies' will probably be excluded.

Are there any exemptions for smaller listed companies?


Will these new rules apply to companies admitted to trading on AIM?


What is the FCA’s objective in introducing these changes?

The FCA wants to encourage listed companies to consider diversity broadly (including the intersectionality of different diversity characteristics). It also seeks to increase transparency for investors on the diversity of boards and executive management of certain companies with UK listed equity shares or certificates representing equity shares. The FCA also wants to improve considerations of broader diversity aspects within diversity policies and related disclosures by all listed companies who are required to comply with DTR7.2.8AR.

This FCA notes that in the future it may look to expand reporting and targets to other protected characteristics such as sexual orientation and disability and other aspects of diversity such as lower socio-economic background. Levels below executive management may also come within the scope of the board diversity targets and disclosure requirements.

When will listed companies be subject to these new disclosure requirements?

The new requirements will probably apply to financial years beginning on or after 1 January 2022.

When does the consultation close?

The consultation closes on 20 October 2021.

When will the changes take effect?

The FCA intends to implement the relevant rule changes by late 2021 although this is subject to consultation feedback and FCA Board approval.

How can we help?

If you would like to discuss the consultation, please speak to Nick Graves or your usual Burges Salmon contact.

Key contact

Nick Graves

Nick Graves Partner

  • Head of Corporate
  • Corporate Advice
  • Mergers and Acquisitions

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