Section B of the UK Corporate Governance Code on effectiveness deals, among other things, with appointments to the board. Main Principle B.2 provides that there should be a formal, rigorous and transparent procedure for appointment of new directors. One of the supporting principles is that the search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender. This principle was introduced in June 2010 specifically to encourage diversity (for further information, see Practice note, UK Corporate Governance Code: effectiveness).

According to the 2010 Female FTSE Board Report conducted by Cranfield University, women accounted for only 12.5% of all directors in FTSE 100 companies, and 7.8% in FTSE 250 companies. The Cranfield University study also found that there were no women on the boards of 21% of FTSE 100 companies, down from 25% in 2009, and that 52.4% of FTSE 250 companies had no women on the board.

On 6 August 2010, the government announced that Lord Davies of Abersoch would develop a business strategy to increase the number of women on the boards of listed companies in the UK. The terms of reference for the Mervyn Davies' review were to consider options for promoting gender equality on the boards of listed companies (and in doing so, to consider the obstacles to women becoming directors of listed company boards), and to make proposals on what action should be taken to improve the position. The review was to involve interested parties including board members, executive search firms, investors and other interested parties in considering proposals for change.

BIS issued a call for evidence on 8 October 2010, seeking views across the business world, with the emphasis on finding solutions to break down barriers. The call for evidence closed on 30 November 2010.

Lord Davies presents a number of practical recommendations in his report to address the poor representation of women on boards when compared to their male counterparts. He has rejected, however, the recommendation by some 11% of respondents that statutory quotas should be introduced, although these will be held in reserve by the government in the event that the recommended "business-led approach" does not result in significant change.

The report cites evidence that suggests that companies with a strong female representation at board level perform better than those that do not have such representation, and that gender diverse boards have a positive impact on performance.

Lord Davies' practical recommendations include the following:

Lord Davies decided not to recommend the advertising of all opportunities as the report acknowledges that this could be cumbersome and may add expense and additional procedures. Ultimately, the report concluded, such advertising would probably not make much difference to the outcome for women.

Annex A to the report looks at the various initiatives and actions being taken in other countries to address the issue of gender diversity in the boardroom, including information on certain countries that have introduced quotas, such as Norway and Spain.

The steering board (made up of experts from the business world and academia), which supported Lord Davies in his review, will meet every six months to consider progress against these recommendations and will report annually as to whether sufficient progress is being made.

The European Commission is also considering what measures might bring about greater gender diversity in the boardroom, and is expected to publish a Green Paper on boardroom diversity in 2011.

The FRC has announced that it intends to consult on the recommendations made to the FRC in Lord Davies' report, and whether to make further changes to the UK Corporate Governance Code to encourage companies to report on their policies concerning boardroom diversity.

The FRC confirms that it will consult on: