Oct. 11 (Bloomberg) -- Britain’s accounting regulator is changing reporting rules for companies listed on the country’s stock exchanges in a “flexible” effort to increase boardroom gender diversity without using legal requirements.
Amendments to the Financial Reporting Council’s corporate- governance rules will require companies to report each year what steps have been taken to implement their boardroom-diversity policies and explain failures to comply, the watchdog said today in a statement. The new provisions will apply to financial years beginning on Oct. 1, 2012.
Britain’s “comply or explain” approach to certain boardroom rules “can deliver a flexible and rapid response and is therefore preferable to detailed legal regulation,” Sarah Hogg, the FRC’s chairman, said in the statement.
The new rules, proposed in May by former U.K. trade minister Mervyn Davies, add to changes made to the code last year to make boardrooms more accountable to shareholders, such as calling for directors to be re-elected annually at companies listed on the U.K.’s FTSE 350 index. Those amendments were the first since the bailouts of Royal Bank of Scotland Group Plc, Lloyds Banking Group Plc and Northern Rock Plc during the financial crisis.
The FRC said gender diversity also strengthens board effectiveness by reducing the risk of “group-think,” making better use of talent and “keeping companies in touch with their customers,” according to today’s statement. The regulator will also start including gender as a factor when evaluating a board’s effectiveness, it said.
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