Ethical Performance
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Code aims to put more women on boards


UK companies with all-male boards have been told to re-evaluate their selection methods by the country’s governance and reporting regulator, in a move that has been welcomed by investors.

Starting this month, the new UK Corporate Governance Code will require firms to evaluate directors against ‘external’ indicators – of which gender diversity is the most important – every three years, and in consultation with outside experts.

The new code says: ‘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.’ It adds that a focus should be on a ‘balance’ of experience, not just the merit of individuals.

However, unlike in Norway, where quotas for increasing the number of women on boards are in place, the code lists ‘principles’ rather than requirements, so firms will not have to publicly account for their lack of women directors.

A quarter of FTSE100 companies have no female representation at board-level, while only 12 per cent of company directors are women.

Investors have praised the requirement. Benjamin McCarron, responsible investment analyst at Co-operative Asset Management, said: ‘Board diversity is more likely to bring a breadth of opinions and provide the best leadership for a business.’

Some have criticized the move, however, arguing that it will cause conflict in the boardroom. Roger Barker, head of corporate governance at the Institute of Directors said: ‘Our women want to achieve a position on the board through their own merit and own abilities. When this artificial mechanism is used it undermines their own legitimacy. People will now question why they have come to be on a board.’

There is also a new requirement for the annual re-election of directors by shareholders in FTSE350 companies, which could result in 3000 directors submitting themselves to a shareholder vote next spring.

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