"Companies must be made to publish and explain huge differences in pay levels between executives and workers, and set out the steps they are taking to tackle the gender pay gap"
The FRC has today published proposals for a 'shorter and sharper' UK Corporate Governance Code which focuses on gender and ethnic diversity as well as differences in pay levels between executives and workers.
The FCA says UK firms must ensure appointments to boards "are based on merit and objective criteria to avoid group think" and promote diversity of gender, social and ethnic backgrounds.
The report says "there is clear evidence that greater female representation in the boardroom and senior management has a positive impact on performance".
The proposals also give pay committees more responsibility over exec remuneration and require boards to take more action when they encounter "significant shareholder opposition on any resolution", including those on executive pay policies and awards.
The FRC says the revised Code "focuses on the importance of long-term success and sustainability, addresses issues of public trust in business and aims to ensure the attractiveness of the UK capital market to global investors through Brexit and beyond".
Sir Win Bischoff, Chairman of the FRC, said: "At this critical time and as the country approaches Brexit, a revised Code will be essential to restoring trust in business, attracting investment and ensuring the long-term success of companies for members and wider society. We have engaged with many stakeholders and incorporated suggestions from the Government’s Green Paper on Corporate Governance Reforms, to produce a Code which is shorter and sharper and fit for purpose.”
Nicky Morgan MP, Chair of the Treasury Committee, commented: “It’s good to see that the revised code seeks to promote diversity. As the report states, ‘there is clear evidence that greater female representation in the boardroom and senior management has a positive impact on performance’.
“The long-term success of a company can be driven by a positive corporate culture, so its inclusion in the revised code is also welcome.
“The Committee will consider these reforms to the code as part of its inquiry into Women in Finance, and will discuss them in further detail when we take evidence from the FRC in the New Year.”
Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy Committee, added: “The FRC rightly flags up the Taylor review of modern working practices, making it clear that boards are ultimately responsible for stamping out the unacceptable practices we have unfortunately seen at some companies. Companies must be able to justify their employment model to shareholders and the public.
“It is right to focus on pay. Companies must be made to publish and explain huge differences in pay levels between executives and workers, and set out the steps they are taking to tackle the gender pay gap, when detailed figures are published next year.
“At a time when the Financial Conduct Authority is considering changing listing requirements to attract foreign investment in such questionable cases such as Saudi Aramco, it is vital we protect and improve the highest possible standards of UK corporate governance.”