Lord Davies requested that companies announce their aspirations on targets for female board representation by September 2011. There appears to have been a mixed bag of responses to this request. The Cranfield report shows that 61% of FTSE 100 companies have made statements that acknowledge issues of gender diversity on corporate boards. Other FTSE 100 companies and the majority of FTSE 250 companies have yet to make any form of announcement on gender diversity.

This could partly be due to companies awaiting the outcome of the proposed Code changes (see below), and partly (in the case of FTSE 250 companies) due to a wait and see approach to other companies' responses.

The Cranfield report also highlights the case for merit. About a third of statements made by FTSE 100 and FTSE 250 companies balance a commitment to gender diversity with continued support for a merits-based approach to appointments. This "reflects a concern for addressing the notion of meritocracy in relation to quotas or targets".

From a corporate governance perspective, the overriding consideration for appointments has to be who will be most beneficial to the success of the company. So, if the focus continues to be on merit, the real issue here, and one which schemes such as the FTSE 100 Cross-Company Mentoring Programme (a programme encouraging company chairmen to advise women executives with board potential) are attempting to address, is how to support women throughout their careers to ensure that they reach a suitable standard of merit. The programme has recently been expanded to include a similar scheme for FTSE 250 companies.

Two Code changes aimed at promoting gender diversity on boards will apply to financial years beginning on or after 1 October 2012, although the FRC is encouraging companies to apply and report on these changes with immediate effect. Under the changes, a listed company will be required to:

Despite some opposition, the FRC decided to press ahead with including specific references to gender diversity in these amendments. Rosemary Martin, Group General Counsel & Company Secretary at Vodafone Group Plc welcomes this decision. "By speaking of diversity generally, albeit including specific reference to gender diversity, the FRC has managed to avoid narrowing the issue to one of gender only. The challenge is to encourage diversity of approach, thinking style and perspective to foster an environment for better decision-making. The paucity of women on boards is a symptom of the underlying issue, which is a lack of diversity in boardrooms and other influential forums."

It remains to be seen, however, if specific references to gender diversity in the Code could result in companies' diversity policies being weighted in favour of gender at the expense of boardroom diversity in general, with attributes such as age, experience, expertise, nationality, and professional background receiving lesser consideration.

The FRC is not proposing to issue guidance on what should be included in a diversity policy, so it will be left to companies to find their own way, or, in some cases, review their existing policies. According to the Cranfield report, 56% of FTSE 100 companies, and 35% of FTSE 250 companies, reported having a policy on boardroom diversity. However, these policies are not generally supported by measurable targets or clear reporting, so some detailed guidance might have been welcome.

On 22 July 2011, a voluntary code of conduct was issued for headhunters in line with a recommendation in the Davies report. The code covers gender diversity and best practice in the context of the search criteria and processes relating to FTSE 350 board level appointments.

Institutional investors are also keeping an eye on gender diversity on boards. The Association of British Insurers has recently published a report on board effectiveness, which looks at board diversity as well as succession planning and board performance evaluation (see "Board effectiveness: ABI report", Bulletin, Company, this issue). It recommends, among other things, that companies should make achieving diversity of perspective a key objective in board appointments, and should discuss openly the issues and challenges that they face in achieving diversity in their annual reports.

The UK initiatives are running in parallel with a big push in this area at an EU level. The EU Corporate Governance Green Paper argues for the benefits of board diversity. Based on a voluntary pledge to which Viviane Reding, the EU commissioner for justice, asked companies to sign up to in March 2011, listed company boards should aim to be 30% female by 2015 and 40% by 2020: a higher bar than that recommended by the Davies report (see also feature article "Corporate governance: a long way to go?", www.practicallaw.com/1-507-1652). Only eight companies have signed up to the pledge so far.

The European Commission has said that it will review progress on gender diversity in March 2012 and, if necessary, may call for legislative measures.

Some European countries, including Norway, Spain and France, have gone further in an attempt to increase the number of women on boards by passing laws setting quotas for the number of female company directors. The numbers of female executives has risen in these countries. However, as with all such initiatives, the only measurable outcome is the actual number of women on boards. It is impossible to gauge whether the companies following codes of conduct or abiding by quotas are performing better than they would be without greater female representation.