Companies need to improve their governance and reporting if they are to demonstrate a positive shift in their company culture as expected by the regulator, according to a report.
A review of the UK Corporate Governance Code by the Financial Reporting Council showed there was still limited reporting on diversity and minimal discussion about assessing or monitoring culture throughout large UK firms.
The FRC found almost all companies stated they had a diversity and inclusion policy, while most included statistics for female employees at both board level and senior manager roles.
Some also explained elements of chief executive remuneration packages which were linked to diversity, while others disclosed to the council they had specific panels to recommend actions to improve diversity.
But beyond this there was little information on diversity approaches, according to the report.
A few FTSE 100 firms used succession planning to improve diversity by setting up hiring parameters to help, the report said. For example, some companies reported they only accepted gender-balanced long lists from recruitment companies, or only worked with companies which followed codes of conduct.
The FRC said it expected more companies to be reporting on diversity and explained it was not clear from firms whether they had targets relating to diversity or whether any action was being taken to achieve a target.
On top of this, any action taken to tackle the challenges surrounding diversity almost always stopped at gender.
The report stated: “While several FTSE 100 companies did comment on ethnic diversity and included plans and targets to improve this area, only one or two reported on their approach to age, disability and LGBT+ diversity.
“We expect to see an increase in more detailed commentary on all aspects of diversity in future disclosures.”
The UK Corporate Governance Code — set by the FRC — sets out standards of good practice for listed companies, so applies to large advice firms such as St James’s Place and Quilter.
The code was updated last year in a move which “raised the bar considerably”. The FRC reported the changes had led to some high-quality reporting, but said greater focus was needed on stakeholder engagement, diversity and the importance of culture.
The FRC said a “disappointing” number of boards had focused on improving culture after finding only a few companies had a specifically targeted an alignment of culture with their values and strategy.
Overall there was limited discussion around assessing and monitoring culture and of the companies that did, the main tool used was surveys.
The review found very few companies cited more than three metrics to look at their culture, and the FRC urged companies to link different sources together to help companies better understand their own culture.
The FRC is not the only body bringing culture to the forefront for businesses. At the start of December the regulator rolled out the Senior Managers and Certification Regime to all financial services firms to establish positive cultures and effective governance.
Anna Sofat, chief executive of Addidi, said: "Corporate governance was meant to hold a business to account but over the years had become a way for large companies to release statistics that support their growth.
"This has certainly been the case with diversity whether this is gender or race — there is much noise and lip service, but until recently little progress was made."
Ms Sofat said the industry needed accountability alongside legal requirements, adding both equal pay and race equality had been law for a long time but hardly any businesses had been held to account in relation to it.
Jane Goodland, corporate affairs director at Quilter, said the advice sector would be "stronger" and "better" positioned to give advice if it reflected the society it served.
She added: "There has been much focus on gender diversity in recent years and we are starting to see some meaningful changes within the advice industry as a result.
"We now need to ensure that we are channeling that energy to encompass diversity in its widest sense.
"Among other things diversity should be regularly on the board agenda, including sexuality, disability and ethnicity, with a commitment to fostering an inclusive culture."
imogen.tew@ft.com
Financial Adviser is calling on the regulator to do more to encourage, promote and support diversity and inclusion across financial services. Let us know what you think by emailing fa.letters@ft.com
