FCA's 'comply or explain' D&I Targets
Sheryl Miller
ERG Leadership Training | Global Diversity, Equity & Inclusion Consultant | Speaker | Author | Ex EY | MBA |
After months of consultation, the FCA has finally ruled on the diversity and related disclosure requirements for listed companies.
In case you haven't seen it, here's the short version. Certain listed companies will be required to disclose in their annual financial reports, on a ‘comply or explain’ basis, that
There is also the requirement to provide a detailed table showing the composition of the board and executive management.
Contrary to what people would expect, given the work I do, I'm not actually a huge fan of 'diversity quotas/targets' in and of themselves. However I do think this FCA edict is a step in the right direction for many reasons.
Made you look, made you stare
Whether or not companies are going to jump for joy at this ruling, or are already crafting their best 'dog ate my homework' excuses, aka 'explanations' as to why they cannot meet the FCA's requirements, it will get boards thinking. More than that, it will get boards talking about why they are or aren't compliant and they will have to make a conscious decision to remain non-compliant.
Shame is never a healthy motivator of human behaviour but this has an element of 'name and shame' about it that will drive companies into not wanting to be seen to be behind the curve. It will focus the attention.
Why Diversity in Executive Management is important
For a while now there has been much fanfare about the progress of women in leadership. Review after review has lauded the increasing percentage of women on boards. I get excited about the prospect of opening a bottle of fizz to toast this year's progress only to read in the fine print that representation at an Exec level has hardly moved a smidge.
It could be argued that some companies have been ticking boxes by packing their Non-Executive board seats with women in order to appear progressive - one of the reasons I don't like quotas is the gaming. Alongside this, Non-Executive roles, whilst they can bring diversity and challenge to an organisation on some level, are not the same as Executive management. The clue's in the title - one executes and therefore has a more active role in the day-to-day running of the operation, and the other does not and is usually part-time. Achieving diversity within the Executive team should, in theory, have a greater impact on the level of innovation, challenge and creativity in the wider organisation, than the diversity that stops with Non-Executives.
The FCA ruling tackles this squarely by seeking greater transparency in terms of diversity at Board and Exec level and goes a step further by also requiring wider representation in the senior board positions - Chair, CEO, CFO or Senior Independent Director.
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Beyond 'BAME'
We all know that labels are for cans of food and not people. But until we evolve past seeing people through socially constructed colour classifications, we need a way of measuring the racial make up of boards.
Remember the embarrassing moment in July 2020 when then Health Secretary was asked how many black people were in the cabinet and he bungled his way through every person of colour he could think of, lumping them all under the BAME umbrella?
The FCA requirements for detailed tables using ethnicity as defined by the ONS is a step in the right direction. It tackles this very issue, recognising that inclusion, exclusion and discrimination affect groups differently.
Easier said than done
Change doesn't happen overnight (unless it's forced by a pandemic).
Building diverse leadership teams doesn't happen overnight.
This will take concerted effort and conscious strategies. Ways of hiring and promoting will need to be overhauled. The recruiters and head hunters used will need to be challenged to make sure they are truly on the right page and not just ticking the 'diverse shortlist' box by providing random people who are not a good match.
Succession planning meetings will need to be debiased, based on evidence rather than whether or not someone 'is a good guy'.
The barriers to progress that are further down in the organisation, aka the 'broken rungs' will need to be fixed.
People from under-represented groups will need Executive sponsorship, the kind that often happens informally when someone joins the company who reminds an Exec member of themselves. They will need to be championed, challenged, stretched and given real P&L responsibility. And when they make mistakes, we need to cut them the same slack we would as someone who reminds us of ourselves or looks just like us.
This is how we will start to tackle homogeneity at the top.
I'm not a fan of diversity targets but I'm excited to see where this new FCA ruling takes us.
Leadership, Culture & Performance Consultant, Speaker, Trainer, Facilitator, Emissary Advisor, Coach and Author [Humanity Inc] with a proven track record in creating highly engaged and successful teams and businesses.
2 年This is rightly the direction of travel but far too many companies are still asleep. It’s an oldie but a goodie - what you target and measure gets done.
Strategic EDI and culture leader working to create a more just world
2 年Great article Sheryl Miller ACA MBA Diversity Consultant, Author. Targets and quotas are tricky. I'm disappointed that we live in society where we have to hold people to account for inviting diverse people, voices and perspectives into the conversation. So from that perspective, I fear that targets and quotas could be perceived as being tokenistic. Conversely, as you allude in your article, if we don't take this kin of action, we rely on the judgements and decision-making of usually homogenous groups where there is often unaddressed bias and a level of comfort with the status quo that excludes anyone perceived as other (even though, in the case of women we are half of the global population!). In that respect, it is good to see this step being taken so that we can begin to see representation, although I do think the FCA could have stretched themselves in the prescribed numbers / additions which are not reflective of the society we live in and, especially in relation to race and ethnicity, with new UK census data due soon, is likely to fall way below what society actually looks like. It would be interested to know / see who were the decision-makers in setting these targets and if the same 'quota' was applied to that group.
Founder of Black Talent Awards & Evenfields | Engaging Keynote Speaker | Championing Black Talent Pipeline Attraction and Retention | Inclusive & Sustainable Recruitment | Building Corporate Partnerships
2 年I'm here for targets and sanctions, nothing else seems to be moving the dial on diversity, so lets apply a little pressure - targets work in every other area of business so why not?