The new regulations let companies choose whether to report the composition of their boards based on sex, or based on “gender identity”. Our brief guidance for companies explains the implications of each choice. Companies can’t mix and match between sex and gender identity in diversity reporting: they must choose one or the other. We cover the pros and cons of each option, and explain how best to approach trans inclusion.

Reporting on sex is simple, coherent, prudent and consistent; reporting on gender identity is a risky and problematic option. Choosing gender identity:

• does not serve the objective of improving female representation
• requires a completely new and separate data collection process
• increases complexity
• creates risks related to data privacy
• creates the potential for belief discrimination
• opens companies to controversy and reputational damage.

For Women Scotland’s recently won a legal case against the Scottish government about the definition of “woman” used in legislation aimed at increasing the number of women on public boards.

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439 people and organisations (over 80% of respondents) raised the issue of gender vs sex in their response to the consultation. Of those, 438 opposed the self-ID proposal and one supported it. 

The FCA u-turn also follows a decision in the Scottish Inner House where For Women Scotland succeeded in their appeal challenging similar legislation which redefined “women” as a gender identity in relation to public boards in Scotland.

The new regulations allow companies to continue to report the composition of the board based on sex, or to chose to report based on gender identity if they wish. This is an awkward, face-saving compromise for the Stonewall Champion, but it steps back from imposing gender identity on thousands of major businesses.

The FCA’s policy requires listed companies to publish data on the number of men and women on their boards, and to say whether this is based on sex or gender identity. They are required to report against targets of: 

• at least 40% of board members being women 
• at least one of the senior board positions being held by a woman. 

Sex Matters, Legal Feminist, For Women Scotland and Sex not Gender all responded to the consultation highlighting that reporting on gender identity creates problems for data protection and privacy, and conflicts with existing requirements under the Companies Act to report data on sex.

In response to the issue of data protection, the FCA said it recognises that:

“collection and publication of personal data on sex has been workable in the context of UK data protection law to date and our final rules enable issuers to use the same data for the purposes of reporting under our rules.”

The new regulations leave it open for companies to chose to report on gender identity:

“We have removed the guidance on self-identification which accompanied the targets and data disclosure table and … given companies more flexibility to determine how best to collect data from employees.”

They must be consistent in applying this to everyone on the board, and all companies must explain whether they are reporting on sex or gender identity data.

Although the category “non-binary” was scrapped, companies that choose to report based on gender identity can also add “other categories” if they choose. 

Maya Forstater, Executive Director of Sex Matters, said: 

“The FCA was wise to allow companies to report straightforwardly on the proportion of male and female members of their boards, in line with the Equality Act and the Companies Act, and not to start requiring them to ask board members to declare that they have one of many fluid “gender identities”. It is not for the financial regulator to redefine what ‘man’ and ‘woman’ mean.”

City lawyer Cathy Pitt, who is a member of the Sex Matters advisory group, said:

“Collecting and reporting data on sex remains important, because how else can we measure improvement on closing the gap between men and women? Large listed firms still need to tackle sex-based discrimination on everything from pay and promotion to harassment and corporate culture.”

Companies that remain part of the Stonewall Champions Scheme are likely to come under pressure to collect data on the gender identity of board members, and not their sex, but they should consider the risk of belief discrimination from requiring all board members to declare their position on gender-identity questions.

They should also consider the opinion of the Inner Court in Scotland which declared that it was outside the Scottish Government’s competence to redefine the word “woman” as a protected characteristic in via The Gender Representation on Public Boards (Scotland) Act 2018. Lady Dorrian, said:

“By incorporating those transsexuals living as women into the definition of woman, the 2018 Act conflates and confuses two separate and distinct protected characteristics.”

As the FCA said “issuers should also be reminded that they remain subject to equalities legislation, including the Equality Act 2010 and its provisions on discrimination.” Accepting the FCA’s invitation to discard sex and instead adopt novel categories which conflate and confuse two separate and distinct protected characteristics creates risks of discrimination which general counsels should be wary of.

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The “Sex Matters in the City” breakfast, hosted at a private equity firm, attracted bankers and senior professionals from finance, HR, and law. Each brought different ideas and perspectives, as well as energy and concern for how their industry is creating risks for firms and for society. This will be the first of a series of meetings drawing in professionals from both the financial and corporate sectors. (You can register your interest to be involved here.)

They discussed concerns that corporate diversity and inclusion efforts have become overly focused on gender identity at the expense of addressing barriers to inclusion for women, people with disabilities, ethnic minorities and other under represented groups. 

Monica Kurnatowska, Cathy Pitt and Sam Bussey from Sex Matters’ advisory group all spoke passionately and knowledgeably about the reputational and legal risk to firms that fail to recognise when sex matters, and the negative impact on progress for inclusion and diversity. 

Gender self ID through the back-door: corporate reporting regulations

One urgent issue on the agenda was the Financial Conduct Authority’s ill-thought through proposal to force PLCs to collect information on the gender identity of their board members (“women, “men” or “non-binary”)  instead of continuing, in line with the requirement of the Companies Act 2006, and the practice pioneered by the FTSE Women Leaders Review,  to focus on the balance between male and female senior leadership, based on sex. 

This regulation won’t just cover financial services companies but all listed businesses. 

We understand that the FCA (which includes amongst its senior management the Chair of Stonewall) is planning to issue regulations in the new year. Although the formal consultation has closed, there is still time to raise the issue with the FCA.

Following on from the meeting, Sex Matters together with Legal Feminist have produced a four-page briefing on the legal, practical and reputational risks of the FCA’s proposed approach.

We propose the FCA take a simpler approach in line with the law: companies should collect data on sex as recorded on birth certificates, in the same way as the census. This would reflect the current law and balance transitioned people’s right to privacy (as secured by a Gender Recognition Certificate) with the purpose of the measure, which is to promote women on boards and executive committees. 

We hope that the FCA will pay attention to the risks it had not considered, and to the recent decision from the Supreme Court in the “X Passports” case:

“There is no judgment of the European Court of Human Rights which establishes a positive obligation to recognise a gender category other than male or female, and none which would require the Secretary of State to issue passports without any indication of gender.“

The next step by Sex Matters – and the network of business and financial professionals  gathered at the meeting – is to get this briefing into the hands of those concerned with risk across the business and financial sector.  

If you work in the corporate or finance sector and would like to be invited to future meetings, or to help us get this briefing  into the hands of people who should read it, register your interest here. 

In the the longer term, we will be working on producing briefings on the business case for a more balanced approach to diversity and inclusion, and on what the law actually requires when it comes to sex and gender identity, for the C-Suite and board, and for HR.

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The new regulations would cover over 1000 firms, employing tens of millions of people, and the measures they take are intended to influence broader diversity and inclusion policies.

In an astonishing move for a financial watchdog that is supposed to be prudent, open and transparent the FCA proposal is not to accurately count the numbers of male and female directors according to their legal (or biological) sex, but instead to invent an entirely new set of categories that have no basis in the law:

Sex Matters response

We have sent in a response to the consultation rejecting this approach.

We argue that the FCA should follow the law. They should:

1. Amend the regulation to be clear that it concerns the balance between the two sexes on boards
2. Provide a reporting format with records straightforwardly whether directors are male or female (or prefer not to say)
3. Not take up “non-binary” as a category. Parliament has not agreed this. It is not the FCA’s role to redefine the sexes.
4. Decide whether they are collecting data on legal sex, or biological sex and publish the justification and reasoning for it.
5. Publish an equality impact assessment that assesses the impact of their choices on people with protected characteristics as defined in the Equality Act 2010,

We point out their proposed approach is not in line with the Equality Act 2010, the Census, the advice of the Office for Statistics Regulation, the Data Protection Act 2018, the Companies Act 2006, or even the Gender Recognition Act 2004.

Like the “X Passports” case this seems to be another effort at radical reform making an end-run around parliamentary democracy.

How much has Stonewall had a hand in this?

In its 60 page consultation document (released with a 12 week consultation period) the financial regulator does not even make the case for why it proposes abandoning straightforward, accurate data on the number of male and female directors and instead wants to count the number of people performing femininity. It does not explain “non-binary at all”. It just expects this to be a done deal.

Why have has the financial regulator rolled out the rainbow carpet for this?

Could it be linked to the role of Stonewall Chair Sheldon Mills on the FCA Executive Committee?

Could it be because the FCA (along with the Bank of England) are Stonewall Champions? (proudly at number 59 on the Stonewall Index)?

The FCA staff handbook includes the usual traces of Stonewall’s advice; a maternity leave and breastfeeding policy that awkwardly avoids the words “woman” or “mother”, and talk of “sex assigned at birth” and of “gender identity”. And yet for all the effort the FCA has put into rainbow washing, staff chats reveal statements like “‘I’ve never worked in such an unhappy place” and “belief and trust in ExCo [the executive committee] is non-existent.” The Chair has just stepped down amid plummeting morale.

In February 2021 one of our supporters put in a freedom of information request about the FCA’s dealings with Stonewall. She has followed up several times and so far they have written back three times saying that they are still processing the request. We think it is high time they came clean.

Write to the FCA to tell them that it is not their job to try to impose Stonewall law on us through the financial markets (you can respond to the consultation by 20 October cp21-24@fca.org.uk or write to CEO Nikhil Rathi )

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