Essential Corporate News: Week ending March 17, 2023

Parker Review: Improving the ethnic diversity of UK business – An update report

On March 13, 2023 the Parker Review Committee published an update report announcing progress by FTSE 350 companies in appointing ethnic minority directors to their boards. The figures announced are from a recent 2022 voluntary census on the ethnic diversity of FTSE 350 company boards, carried out by the Parker Review Committee jointly with the Department for Business and Trade. In its first report in 2017, the Parker Review made a series of recommendations and set a "One by 2021" target for all FTSE 100 boards to have at least one director from a minority ethnic background by December 2021 and a "One by 2024" target for all FTSE 250 boards.  

Results for FTSE 350 companies as at December 2022

96 FTSE 100 companies met the target with at least one minority ethnic director on their boards, up from 89 in 2021. Of these 96 FTSE 100 companies, 49 companies have more than one minority ethnic director on their board. The great majority of positions held by ethnic minorities are non-executive director positions (159 out of 190) but ethnic minorities do now represent 10% of Chair and executive director positions.

FTSE 250 companies are making progress towards the 2024 deadline of appointing at least one minority ethnic director, with 67% of companies that responded meeting the target in 2022, up from 55% in 2021. 

New target set for FTSE 350 companies in relation to senior management

The Parker Review Committee is now asking FTSE 350 companies to set and achieve appropriate targets for executives below the board. However, recognising that a “one size fits all” approach to ethnic minority targets would not be the right way to approach this, companies are asked to set their own target for the percentage of their senior management group who self-identify as being in an ethnic minority. 

The senior management group is defined as the Executive Committee (or its equivalent) and the senior managers who report directly to Executive Committee members. The target should be set by December 2023 and should be a target for what the percentage will be by December 2027. 

Companies are also strongly encouraged to describe in their annual reports the management development plans they have in place to encourage and support achieving a diverse and inclusive pipeline.

New target for large private companies

In the same way as the FTSE Women Leaders Review now includes gender data in respect of the 50 largest UK companies, the Parker Review Committee will ask those same  50 private companies to provide information about their ethnic diversity from December 2023 onwards. They are being set a target of at least one ethnic minority director on their main boards by December 2027, and also to provide targets for ethnic minorities within senior management in the same way as is being proposed now for FTSE 350 companies. 

Employee self-identification

The Parker Review Committee also urges companies to encourage as many of their employees as possible to self-declare their ethnicity so that companies have data available to guide their decision-making in this area. The report includes a number of suggestions to help companies put more effective systems and processes in place for data gathering. 

(Parker Review Committee, Improving the ethnic diversity of UK business – An update report, 13.03.2023)

HM Treasury: Women in Finance Charter – Annual Review 2022

On March 16, 2023 HM Treasury published the latest Annual Review monitoring signatory progress in the past year against the Women in Finance Charter that was launched in in 2016. Signatories of the Charter must report annually to the Treasury on their progress against their self-created targets for women in senior management.

The main headlines figures from 2022 include the following:

• The average female representation has increased to 35% in 2022. This shows an improvement as this number remained flat at 33% in 2021 and 2020.
• 77% of signatories have either increased (71%) or maintained (6%) their proportion of women in senior management.
• Signatories’ ambitions for their targets continue to increase with half setting a target of at least 40%.
• Of the 73 signatories with a 2022 deadline, 44 hit their targets and the remaining 29 missed, down from 31 in 2021. Of the 29 that missed, 22 were close – either within five percentage points or five appointments of hitting their targets.
• For the first time since the Charter’s creation, the top quarter of firms (52) have achieved at least 40% female representation in senior management.

(HM Treasury, Women in Finance Charter, 16.03.2023)

MoJ: Electronic execution of documents – Final report of Industry Working Group

On March 14, 2023 the Industry Working Group, established by the Government in spring 2021 following a 2019 Law Commission report Electronic Execution of Documents which concluded that e-signatures were valid for the vast majority of business transactions and legal processes, published its Final Report. This follows publication of an Interim Report by the Industry Working Group in February 2022.  

The Interim Report dealt with six of the Industry Working Group’s eight Terms of Reference. The Final Report is concerned with the final two of those: challenges arising from the use of electronic signatures in cross-border transactions and how to address them, and how to protect signatories to deeds from potential fraud. 

Cross-border transactions

The Final Report notes that legal agreements underpinning cross-border transactions may need to be drafted and executed in accordance with the law relevant to the parties and the governing law in order to minimise the risk that the transaction turns out to be invalid or not binding. The uncertainty around the interpretation of different jurisdictions’ electronic execution laws, and the requirements and formalities surrounding electronic execution can give rise to challenges of increased costs, delay and uncertainty, all of which can hinder adoption of e-signing.

As a result, among its recommendations to deal with this are the following:

• Significant trading states should adhere to some form of international norm or code and the Group recommends that the UK consider adopting the UNCITRAL Model Law on Electronic Signatures, at least in some form. It believes that the formulation and widespread adoption of internationally aligned standards would reduce the risk of the same electronic signature being deemed reliable in one jurisdiction but not another, and Article 6 of the UNICTRAL Model provides a strong example
• It would be very helpful were there to be some form of online “one stop shop” for information on international recognition, standards and requirements.

Protection of electronic signatories to deeds from fraud

The Working Group sets out the advantages of using an electronic signing platform in the deed authentication process over paper and wet ink signatures. These include the following:

• The provision of advice and guidance to signatories can be carried out by that platform and recorded and stored as evidence that the provision occurred. 
• The signing process itself can be recorded and video and audio evidence of it stored for future reference, providing a record that is both more accurate and longer lasting than the testimony of a human witness. 
• Platforms can be configured to ensure that all the requisite steps are followed before the document can be submitted, thereby reducing, if not eliminating the possibility of defective execution. 
• Use of electronic signing platforms can reduce the possibility of physical witness intimidation or duress because a signatory might feel more comfortable taking their time to read and process the document and its implications in the absence of a physical witness. The platform can also record exactly what the signatory saw before signing took place, whilst also being able to restrict access to this data to particular individuals.

New recommendations in Final Report

As well as setting out the recommendations in the Interim Report, the Final Report sets out a number of new recommendations, including the following: 

• Introduction of a set of minimum standards to bolster the integrity of (and public confidence in) the e-signing experience and process, together with consideration of whether certification/self-certification should be introduced, but if so, only in respect of significant transactions.
• If regulation or certification (other than self-certification) is to be required centrally, consider the appropriate authority, which should then: (1) develop a set of signing platform ‘basic performance standards’; (2) publish the standards on a ‘dedicated/go-to’ webpage that is easily locatable for prospective platform users; (3) invite signing platforms to confirm whether they meet the standards; (4) publish a list of signing platforms that submit self-certifications on a go-to webpage; (5) confirm listing on an annual basis.
• Work towards achieving uniformity of approach to e-signing and online identification by way of an international standard or mutual recognition.
• Wholesale adoption by Government in the UK of e-signatures for all Government or official purposes.
• The Law Commission to consider the reform of the law relating to deeds, and in particular the formalities surrounding the execution of deeds.

(Industry Working Group, Electronic execution of documents – Final report, 14.03.2023)