On 20 April 2022, the FCA published Policy Statement 22/3 ‘Diversity and inclusion on company boards and executive management’ (PS22/3).

In PS22/3 the FCA sets out its final policy approach following its proposals in Consultation Paper 21/24 ‘Diversity and inclusion on company boards and executive committees’ (CP21/24). The FCA reports that in light of the broad support for the main elements of the proposals in CP21/24, it is proceeding with the proposed focus of setting annual disclosure requirements on the representation of women and people from an ethnic minority background at board and executive management levels (both against targets on a comply or explain basis and the accompanying numerical tables). It has also maintained the proposed scope of the requirements and is proceeding with the proposed changes to the Disclosure Guidance and Transparency Rules (DTRs).

The FCA also reports that given the feedback on the proposed basis for reporting on women’s representation including the privacy concerns raised by respondents due to the interaction between the proposed disclosures and existing requirements for disclosure under the Companies Act, the FCA have decided to adopt a framework that gives companies more flexibility in how they report. The FCA have removed the guidance on self-identification which accompanied the targets and data disclosure table and have given companies more flexibility to determine how best to collect data from employees, provided their approach is explained and applied consistently. In particular, for the numerical disclosures, the FCA have made it clear that companies can report either on the basis of sex or gender identity. The FCA have also given greater flexibility to issuers who have members of their board or executive management situated overseas in relation to numerical disclosures. In those cases, where local law prevents the collection and / or publication of relevant data, a company may instead explain the extent to which it is unable to make the numerical disclosures and complete the tables.

The FCA has added a new limb to the disclosure, which requires transparency on the issuer’s approach to collecting the data. The FCA consider that, overall, its amended approach will provide flexibility for companies while still achieving its policy objective of enhanced transparency for investors, including by ensuring that the basis on which data is collected and reported is explained. In addition, the FCA expect any differences in the data reported by companies depending on their approach (for example whether using sex or gender identity) will be small and should not materially affect investors’ considerations of this information.

The FCA have also changed the commencement date to financial years starting on or after 1 April 2022.