FCA Policy Statement on Diversity and Inclusion

On 20 April 2022 the FCA published its final rules requiring the disclosure of data in relation to diversity on listed company boards and executive committees.

Policy Statement

  • On 20 April 2022, the FCA published its final rules requiring the disclosure of data in relation to diversity on listed company boards and executive committees. The rules will apply to financial years beginning on or after 1 April 2022, so the first reporting will be in 2023.
  • Companies will be required to disclose annually whether they are meeting diversity targets on a “comply or explain” basis.
  • The targets are:
    • At least 40% of the board are women
    • At least one senior board position is a woman (e.g. CEO, CFO etc.)
    • At least one board member is from a minority ethnic background.
  • Companies will have to set out in their statement:
    • The reference date used, and where this is different from the date used in their previous accounting period and why; and
    • Any changes to the board between the reference date and when the financial report is approved which have affected the company’s ability to meet any of the targets.
  • Companies must also publish:
    • Numerical data on the ethnic background and gender identity or sex of the individuals on the board, in senior board positions and at executive management level in a standardised table format; and
    • An explanation of the company’s approach to collecting the data used for the purposes of making the board diversity and numerical data disclosures.
  • The FCA rules include a glossary definition to clarify what is meant by “minority ethnic background”.
  • The measures are designed to improve transparency on the diversity of company boards and their executive management for investors and other market participants, increasing engagement in this area and informing investment decisions.
  • There is also guidance suggesting the companies may want to include the following in their annual financial report:
    • A brief summary of any key policies, procedures and processes, and any wider context, that it considers contributes to improving the diversity of its board and executive management.
    • Any mitigating factors or circumstances which makes achieving diversity on its board more challenging (for example, size of the board or country where its man operations are located)
    • Any risks it foresees in being able to meet or continue to meet board diversity targets in the next accounting period.


The FCA has previously set reporting rules for larger listed companies. Smaller companies outside the FTSE 100 have traditionally not seen as much diversity on their boards so these companies are likely to be more impacted by the new rules.

However, it is unlikely that any company will see a dramatic change in board composition overnight. In fact, the FCA is not due to review this policy for three years, which acknowledges that it might take time for the effects of the new rules to become apparent.

A recent FTSE board report from Cranfield University and EY found that the number of women on FTSE-listed company boards has risen this year to almost 40%, however 9 in 10 of these women were in non-executive positions. The FCA guidance clarifies that a “senior board position” includes a Chair and Senior Independent Director so there is a possibility that other listed companies will follow suit and simply appoint women as non-executive directors rather than concentrating on succession planning and organic growth and progression.

The FCA has also updated the rules so that companies will be given flexibility to determine how to report on those self-identifying as women. Previously the FCA proposed to limit the reporting requirement to those who were female at birth but various responses to the FCA’s consultation in 2021 argued that this approach was not consistent with the overarching aim of diversity and inclusion. The FCA have therefore left it to individual companies to report on the basis of sex or gender identity.

In practice collecting and processing data in relation to both gender identity and ethnic background might prove to be difficult and listed companies will need to consider what is “special category data” under GDPR and seek data protection advice where necessary.


This information is for general information purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. Please contact us for specific advice on your circumstances. © Shoosmiths LLP 2024.



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