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The Financial Services Skills Commission has issued an insight paper outlining how companies can collect and evaluate data on employees’ socioeconomic backgrounds.

By David Berman, Nicola Higgs, Rob Moulton, and Dianne Bell

Socioeconomic backgrounds of employees and socioeconomic diversity at senior levels across the UK financial services industry is beginning to feature more prominently in diversity and inclusion (D&I) discussions. Several government and industry taskforces and studies conducted on the issue of social mobility and class advantages/disadvantages have revealed striking impacts of this bias within the UK financial services sector. Not only is the sector significantly reliant on individuals from higher socioeconomic backgrounds at the leadership level, but the studies also indicate that employees from working class or lower socioeconomic backgrounds are held back in a number of ways (which may lead to their eventual departure from the sector).

  • Progression gap: Employees from working class or lower socioeconomic backgrounds progress 25% slower than peers despite no difference in job performance, and they find conforming to the dominant cultures “exhausting” and this impacts on their individual performances.
  • Pay gap: A class pay gap of £17,500 appears to exist in financial services (compared with £5,000 in the technology sector).
  • Opportunities to upskill talent: Findings suggest that individuals from lower socioeconomic backgrounds are less likely to sign up for training opportunities.

From a regulatory perspective, this lack of diversity at the senior level impacts the culture of a firm, raising concerns around, for example, groupthink and its impacts on effective decision-making.

The new rules provide issuers with flexibility to report on representation of women by reference to either gender identity or sex.

By Chris Horton, James Inness, Anna Ngo, Nicola Higgs, David Berman, Rob Moulton, and Johannes Poon

On 20 April 2022, the FCA published its final policy decision on the proposals set out in CP 21/24 “Diversity and inclusion on company boards and executive committees”.

New diversity reporting requirements

The updated Listing Rules require in-scope issuers (broadly, premium or standard listed companies, excluding OEICs and “shell companies”) to incorporate into their annual reports certain disclosures on the diversity of their boards and executive management, including:

  • A “comply or explain” statement setting out whether they have met the following diversity targets:
    • At least 40% of the board are women
    • At least one of the senior board positions is held by a woman (Chair, CEO, Senior Independent Director, or CFO)
    • At least one member of the board is from a minority ethnic background (defined by reference to categories recommended by the Office for National Statistics (ONS), excluding those the ONS lists as coming from a White ethnic background)
  • Numerical data on the sex or gender identity and ethnic diversity of their board, senior board positions, and executive management in a standardised table (with issuers able to add to the fields “men” and “women” to include “non-binary” or other gender identities)

By Paul A. Davies, Tom Evans, Nicola Higgs, Farah O’Brien, David Walker, Michael Green, Hannah Berdal, Anne Mainwaring, and Catherine Campbell

Green shoots emerge as PE firms consider new ways to incorporate ESG into dealmaking.

Market sentiment and the increasing importance of environmental, social, and governance (ESG) to firms’ competitiveness across the market, combined with wide-ranging and rapidly developing ESG regulatory reforms, are driving increased focus on ESG at both LP and GP levels across Europe. As a result, the market is showing demand for enhanced diligence, and a wider range of deal provisions are being considered in light of their potential to enhance the ESG outlook of PE investments.

The recommended reforms aim to make the UK’s listing regime more competitive while maintaining high standards of corporate governance, shareholder rights, and transparency.

By Chris Horton, James Inness, and Anna Ngo

A new independent review (the Review), led by Lord Hill, has been released that provides recommendations on how the UK can improve its listings regime. Published on 3 March 2021, the Review aims to impart recommendations that will improve the process of raising equity capital on the UK public markets, whilst also maintaining high standards of corporate governance, shareholder rights, and transparency.

The four-pronged Code aims to encourage issuers in Italy to focus on long-term sustainability and engagement.

By Antonio Coletti and Isabella Porchia

A new edition of the Corporate Governance Code was released on 31 January 2020. The new Code focuses on four essential objectives and principles: sustainability, engagement, proportionality, and simplification.

Sustainability: The new Code intends to encourage Italian equity-listed issuers to adopt strategies based on sustainability. It recommends sustainable success as a priority for company management — defined as long-term value for shareholders and stakeholders — and calls on boards to integrate business plans, internal control and risk management systems, and remuneration policies with appropriate sustainability goals.

Engagement: The new Code recommends that listed issuers develop a dialogue with the market and with investors through specific engagement policies. It assigns a key role to the chairman, who — in agreement with the CEO — is directed to prepare a policy to manage dialogue with investors, which the board will approve and monitor.

Proportionality: The new Code tailors and graduates principles based on the size of the issuer, to promote access to equity capital markets and listing of small- and medium-size companies. Some recommendations are directed at large listed issuers (those with a market capitalisation higher than €1 billion for three consecutive years), while other recommendations apply to issuers with a concentrated ownership controlled by one or more shareholders.

Simplification: The format of the new Code has been simplified. To assist issuers in applying the Code, Q&As based on queries received from issuers will be published on a recurring basis.

The FRC has published a shorter and sharper Code which clarifies requirements for accountability, workforce engagement, and board diversity.

By Claire Keast-Butler, James Inness, Richard Butterwick, and Anna Ngo

The revised Code will apply to all companies with a premium listing on the London Stock Exchange for accounting periods beginning on or after 1 January 2019.

The key points are:

  • Board leadership and company purpose: The revised Code focuses on regular engagement with major shareholders, with companies

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