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WoCoS and Friday Flash Update

Special Report

As part of our COVID-19 Special Updates and in advance of the Women’s Company Secretary Circle (WoCoS) on Monday 14 September at 17:00 GMT, we provide you a policy ‘brief’ on diversity & inclusion, along with a quick note on cash box placings.

Diversity & Inclusion Policy Brief

Board diversity has been on the agenda in the UK for almost a decade with gender diversity taking the lead with a target set in 2011 for FTSE100 companies to have a 25 per cent female board.

This was met in 2015, after which the voluntary target was extended and the voluntary target set by the Davies Report, of a minimum of 25% women’s representation on FTSE 350 boards by 2019 was in place and was superseded by the current Hampton-Alexander Review target which recommends 33% for FTSE 350 companies which should be met in 2020.

Then in 2017 the Parker Review was the first to address Board ethnic diversity and there were also improved diversity reporting requirements for companies introduced, which are reviewed below.

Institutional Investor Policies

It has also been Institutional investors that have helped progress Board improvements in the diversity area with investors such as BlackRock, L&G and State Street, undertaking diversity campaigns which seek to increase the level of female directors on the boards of UK companies, and globally. For example:

  • L&G is categorically voting AGAINST board chairs, at FTSE 350 companies without at least 30% female representation;
  • BlackRock may vote AGAINST the members of Nomination Committees at companies with no female directors (no company size threshold is applied in this case); and
  • The Investment Association/ IVIS has recently changed its colour coding based on member feedback and is now highlighting any company with 25% gender diversity or less as an ‘Amber Top’ on its Corporate Governance section of the AGM report.  IVIS would highlight concern on a ‘Red Top’ where there are none or only one (token) female director present.  These thresholds are applied strictly and do not take into account the direction of travel at the issuer or any stated policies which are in line with market practice.

Promotion of Diversity

Whilst there is a widely recognised call for greater diversity on boards, it is still very much focused on diversity by gender. Less commonly discussed are expectations around diversity comprising individuals who identify with BAME (members of non-white communities in the UK) or representatives from the LGBTQIA community.

We have seen the possibility for counterintuitive voting in this context, whereby an automated vote against a Chair on a board that has not met the mathematical thresholds of diversity could actually be a vote against a female Chair whose very presence is fundamental to sustaining the board’s level of diversity.

Hampton Alexander Review

The Hampton-Alexander Review (the Review), which is an independent, business-led framework supported by the Government set recommendations in 2016 for FTSE 350 companies to improve the representation of women on their boards and in leadership positions. The Review set a minimum 33% target for women on FTSE 350 Boards and in the two layers of leadership below the board, the Executive Committee and the Direct Reports to the Executive Committee, by the end of 2020.

The current Hampton-Alexander Review target which recommends 33% for FTSE 350 companies which should be met in 2020. The Review has its current 4th Report our which is available here:

Sources: Hampton-Alexander Review, FTSE Women Leaders (November 2016 report and subsequent updates published annually), here: Original Review Link: Here

Parker Review

In 2017, Sir John Parker in his ‘Parker Review’ drew attention to the issue of ethnic diversity, and the lack of directors of colour on FTSE 350 boards. The suggested target was for boards to have ‘One by ‘21’, one director of colour on every board by 2021, and for the FTSE 250 to have one by 2024.

In October 2017, the Parker Review Committee, led by Sir John Parker, published its final independent report into the ethnic diversity of UK boards. The initial analysis in the review found that in the FTSE100 only 8% of the director population were people of colour, a total of 85 people across 49 companies, with 51 all-white boards.

The report highlights a number of key facts, including:

  • Diversity in the UK – approximately 14% of the total UK population is a “person of colour” or from a “non-white” ethnic group; and that
  • Directorships – only 85 of the 1,050 director positions in the FTSE 100 (8% as at the end of July 2017) were held by people from ethnic minorities and only 2% of director positions were held by people from ethnic minorities who were UK citizens.

Source: A Report into the Ethnic Diversity of UK Boards. Final Report, The Parker Review Committee, 12 October 2017, link:

The 2017 Diversity Policy Disclosure for Larger Companies

It is often said that what is measured can be managed and this is clearly the regulatory intention behind the gender pay gap reporting requirements that was introduced in the UK from April 2017 for companies employing more than 250 people.

By demanding that larger employers gather gender pay gap statistics and publicly report on them, the Government is clearly hoping that companies and public sector employers will find additional motivation to address shortfalls in pay and opportunity available to women.

The tactic appears to be similar to that applied in seeking to increase representation of women on boards – better transparency through reporting is demanded with a view to changing behaviours in order to achieve a stated objective. In this case, the Government’s ambition is to eliminate the gender pay gap within a generation.

The issue is important not only in terms of achieving fairness. With lower lifetime earnings, women’s pension prospects are also reduced, thereby increasing the risk that women are likely to need to rely financially on the state in old age to a greater extent. With an aging population this is a potentially costly issue for governments.

Action Point: Boards need an action plan to address the issues that contribute towards the gender pay gap.


The Law of 23 July 2016 on disclosure of non-financial and diversity information applicable to some large companies and some groups has been published on Memorial A. This Law implements in Luxembourg the Directive 2014/95[1] and amends the Law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings as amended, the Law of 10 August 1915 on commercial companies, as amended, and the law of 8 December 1994 on insurance annual accounts and consolidated accounts, as amended.

The disclosure of this information is key for managing change towards a sustainable global economy by combining long-term profitability with social justice and environmental protection. In this context, disclosure of non-financial and diversity information helps the measuring, monitoring and managing of undertakings performance and their impact on society.

Alternatively, if gender pay gaps are the outcome of practices which fail to properly support and promote women so that they are underrepresented at more senior levels, then action to address the backing given to female talent in the business should be considered. The organisation should be looking at what can be done to recruit, develop and retain more senior women, including through internal promotion.

Diversity Policy Requirement

By understanding and analysing the reasons for a gender pay gap, the board can develop an action plan to address any gap that should not exist. It can thereby mitigate the risk of reputational damage that might arise from publication of unflattering statistics and even future employment claims. Causes of inequality are complex and the actions needed are likely to be multi-faceted, but should in all cases be backed up by an effective communication strategy.

A communication strategy will equally be beneficial for those employers who are already shining examples of best practice. Those businesses will benefit directly, increasing staff motivation and satisfaction by demonstrating that their employees are valued and treated fairly and that opportunities to maximise their potential will be made available to them regardless of gender.

The UK is certainly not alone in addressing the problem. The gender pay gap is also under the spotlight at EU level, as part of its focus on inequality in the workplace.

Objectives – There is time before publication of the first reports in April 2018 for all employers, whether UK based or with international operations, to move their organisations towards the goal of eliminating gender pay differences. Organisations should demonstrate a real commitment to addressing any shortcomings in current or historical practices revealed by unflattering statistics.


1.1 Companies impacted by the requirements

The disclosure will only concern large Public interest entities (PIEs) as defined by the Accounting Directive 2013/34/EU[2]. Public interest entities are entities whose transferable securities are admitted to trading on a regulated market in the EU, EU Credit institutions and EU insurance and reinsurance undertakings. The Law applies to companies that fulfils the following conditions:

  • Be organised under the form of a public limited company, European company, a partnership limited by shares or a private limited company;
  • Be a PIE; and
  • Exceed two of these three conditions on the balance sheet date, for two consecutive years:
  • Total balance sheet: EUR 20 million;
  • Net turnover: EUR 40 million;
  • Average number of employees during the financial year: 250; and
  • Exceed, on the balance sheet date, the criteria of the average number of 500 employees during the financial year.


Publication of non-financial information

Companies in the scope of the Law have to disclose information regarding non-financial and diversity information (i.e. environmental issues, social issues related to employees, respect of human rights, anti-corruption, diversity of the board members…).


Disclosure in the corporate governance statement

Companies are required to report their diversity policy for the management, supervisory and administrative bodies. Included in this will be the objectives of the policy, for example to ensure a wide range of experience in the company.

The company needs to report the implementation and the results. With regard to the diversity information, the new law implies that the corporate governance statement[3] shall include a description of the diversity policy applied in relation to the undertaking’s administrative, management and supervisory bodies with regard to age, gender, or educational and professional backgrounds, the objectives of that diversity policy, how it has been implemented and the results in the reporting period. If no such policy is applied, the statement shall contain an explanation as to why this is the case.


Date of application

Impacted companies had to start the non-financial and diversity information reporting for accounting years starting from 1 January 2017.

Cash Box Placings and the Proxy Advisers

Cash Box Placings

  • Cash box placings are undertaken via an off-shore vehicle (generally a Jersey company), in which ‘shares’ are purchased by investors. The newly formed off-shore company’s only asset now comprises the cash raised from investors (hence the ‘cash box’ definition). The company seeking to raise capital then issues its PLC shares in exchange for the assets held by the off-shore company – i.e. not in exchange for a direct cash investment, which would require a dis-application resolution under the Companies Act – thus circumventing UK regulation.
  • Another benefit to the issuing company is that, through the cash box structure, funds are generally received more quickly and do not require an accounting re-structuring to convert non-distributable share premium accounts into distributable reserves.
  • Following a change in the Prospectus rules, cash box placings are now possible for issuances up to 20% of ISC (previously 10%) as issuances of shares in excess of this limit in any 12-month period would otherwise require a Prospectus to be issued.
  • However, as cash box placing do not provide shareholders with the right to protect against dilution and require no separate shareholder approval at a General Meeting, they are frowned upon by the investor community. As such, companies that are found to have used these facilities may face considerable investor anger and may find that restrictions are placed upon future share issuances.

Proxy Adviser Views and Voting

  • ISS voting guidelines state that: “A company which receives approval for [a share issuance] authority… but is then subsequently viewed as abusing the authority in a manner not in line with Pre-emption Group Principles – for example, by issuing shares up to 10 percent for purposes other than set out in the guidelines or by using a cash-box structure to issue more than the authority approved at the previous AGM – is likely to receive a negative recommendation on the share issuance authorities at the following AGM.”
  • By way of example, we note the 2020 AGMs of two companies that undertook Cash Box Placings in the wake of the Coronavirus pandemic: Foxtons Group Plc and Informa Plc – as they had differing existing share issuance authorities available to them, these two companies undertook their placings in quite different ways (but both encompassed a ‘cash box’ structure).
  • In the case of Foxtons, only shortly before their 2020 AGM the Company sought the entire placing of just under 20% of ISC in the form of a cash box, to shore up the Company’s balance sheet and cash resources in the wake of the coronavirus pandemic. Consequently, at the AGM ISS recommended votes Against both share issuance authorities (Resolutions 16 & 17). Glass Lewis provided a similar vote recommendation on the non-pre-emptive share issuance authority (Resolution 17) and IVIS published a ‘Red Top’ report on the AGM given the concerns over the cash box placing. At the AGM, these resolutions received votes Against of 7% (pre-emptive authority) and 8.7% (non-pre-emptive authority), respectively.
  • By way of example, another company, Just Group plc, undertook a 10% cash box placing in March 2019, also receiving negative vote recommendations from ISS at their following AGM in June 2019, on the three share issuance authorities (Resolutions 14 – 16). These resolutions received shareholder approval ranging from 76.3% to 85.4% of shares voted.
  • At Informa, the Company only had a 10% ISC pre-emptive share issuance authority outstanding, which meant that it could issue only 10% under the cash box structure. After that, it required renewed shareholder approval for the remaining 10% of ISC, which it sought under a General Meeting for the element of the conditional placing. Given shareholders were offered at least some say in the capital raising, and likely somewhat masking the structure of the remaining 10% issuance, the Proxy Advisers did not recommend negatively on the share issuance authorities at Informa’s 2020 AGM; although, some limited investor grumblings were noted.

Boudicca Recommendation

  • Given the concerns over the removal of a fundamental shareholder right in the UK, not to have your holding and corresponding voting rights diluted, we strongly recommend our clients to seriously consider the need for a cash box structure when formulating their capital raises. It may be legal (and advice from legal advisers and lawyers to boards often suggest that there is no concern with such structures), but is not accepted best practice amongst institutional investors.
  • Even where a cash box placing in practice takes account of the pre-emption rights of existing shareholders by offering them to participate in the capital raise, the principle of such rights is a cornerstone of good governance; as such, the vote decisions of the Corporate Governance teams at the investors often disregard what happened in practice, and what was decided by their front offices in participating in the placing.
  • It is further worth noting that even the updated Pre-Emption Group Guidelines seem to intimate that shareholders should be more lenient during current crises in their ‘support’ of larger share issuances up to 20% (this does still seem to suggest that active shareholder approval should always be sought through a disapplication of pre-emption rights resolution (s.560 of CoAct)).



[3] Article 68ter of law of 19th December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings.