The majority of the FTSE 350 appear to treat reporting as a “compliance exercise”, research conducted by the regulator and the Exeter Business School has found.
It says there is a lack of commitment to diversity as part of their business strategy.
While 98% of FTSE 100 companies currently have a policy on board diversity, only 15% report against all four measures set out in the Corporate Governance Code.
According to the current code (a revised one is set to effect in January 2019), companies should have a nomination committee that leads the process for board appointments and make recommendations to the board. This committee should evaluate the balance of skills, experience, independence and knowledge on the board.
The FRC’s code also says that non-executive directors should be appointed for specified terms of no more than six years without a rigorous review. Lastly, it asks companies to describe the work of the nomination committee, including the process it has used in relation to board appointments and details about the board’s policy on diversity.
The new code, which was published in July and will take effect next year, proposed that annual reports need to include the company’s policy on diversity and inclusion and the gender balance on those in senior management.
Tracy Vegro, FRC executive director of strategy and resources said, “There is almost universal acceptance that diversity contributes to more effective decision-making and mitigates the danger of group think. Some of the findings of this report are disappointing and FTSE 350 companies should provide fuller disclosures on all diversity.
“We expected to see more of our largest companies providing greater information about their approach to boardroom diversity and insights on the actions they are taking to increase diversity at all levels, particularly those in the current UK Corporate Governance Code.
“To maintain a competitive edge and success over the long-term, UK companies need to consider how diversity and inclusion is relevant to the markets in which they operate, all their stakeholders and the communities they serve.”
Vegro said the FRC is writing to companies to challenge them to take a more strategic approach to diversity and inclusion, and to consider their approach to reporting on it.