The Department for Business, Innovation and Skills (BIS) has announced that a new form of report, focusing on strategy, will replace the current business review. BIS has published the draft Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 for consultation, which include a requirement for quoted companies to report on the gender balance overall, at managerial level and on the Board, in addition to other revised reporting requirements.
According to BIS, the draft Companies Act 2006 (Strategic Report and Directors' Report) Regulations (Regulations), are intended to improve corporate transparency and simplify narrative reporting, therefore making it easier for shareholders to hold companies to account.
Following proposals within Lord Davies' review of Women on Boards, quoted companies will be required to disclose the number of men and women across the organisation, at managerial level (a manager is considered to be a person "who has authority and responsibility for planning, directing and controlling the activities of a company and is an employee of that company") and on the board. BIS considers that this will aid companies and investors to identify "talent blockages" and gender inequality within organisations, whilst also persuading companies to pursue greater diversity.
The Regulations also simplify the existing reporting requirements, including removing the requirement for companies to include information about essential contractual arrangements. BIS has stated that there should not be an overall net increase on the burden on companies as a result of the changes made by the Regulations.
This legislation is anticipated to come into force in October 2013. It is intended that the Financial Reporting Council will start consultation early next year with a view to providing guidance for companies on the Regulations. This guidance will provide more information to companies on the practicalities of the implementation of the Regulations.
The Regulations follow amendments to the UK Corporate Governance Code (Code) to report on boardroom gender diversity applying from this month.
Further steps to address the issue of gender imbalance on boards are currently also being considered by the European Commission, with a public consultation on options to deal with this issue, including the introduction of quotas.
In the current economic and political climate is highly unlikely that this will be the last measure implemented in the drive to achieve both gender diversity and greater corporate transparency.