Financial services is one of the UK’s (and particularly London’s) key sectors – and one of the most male-dominated. Although roughly equal numbers of men and women are employed in the sector, women are disproportionately present in lower-paid roles and under-represented at senior levels, with many finding their career progression stalls in middle management. Women appointed to the board are often non-executive directors only. The sector also has one of the widest and most persistent gender pay gaps, particularly in relation to bonuses. An Equality and Human Rights Commission investigation in 2009 found troubling evidence of widespread sex discrimination.
Jayne-Anne Gadhia, CEO of Virgin Money, was commissioned by the Treasury and Bank of England to investigate gender imbalance in financial services. She recently published her final report and, with the Treasury, launched a Women in Finance Charter that banks and other financial services firms can sign up to on a voluntary basis.
What the charter entails
The charter contains three basic elements: reporting (setting internal targets for gender equality and publicly reporting on progress on an annual basis), executive accountability (making a board member individually responsible for diversity and inclusion) and remuneration, whereby executive bonuses must be linked to the business’ success against its gender equality targets.
It is non-prescriptive, leaving it to participants to determine their own targets and how bonuses should be linked to target achievement. It also leaves it to organisations to determine the precise form of reports, although it suggests they should cover the firm’s overall gender split, the split for different business units, functions and organisational levels, and the split at board and senior managerial level. It also suggests that firms publish gender split data on hiring and promotions, flexible working and departures, and data on maternity/paternity/shared parental leave returners.
In some cases this will not add significantly to existing reporting obligations, particularly for the larger institutions. Listed companies already have various reporting requirements linked to diversity, as do CRD IV firms (banks, building societies and investment firms). Some larger businesses go further and participate in voluntary frameworks such as Think Act Report, which requires participants to collect data on gender equality across the business, address issues identified, and report on progress.
Gender pay gap reporting requirements due to come into force in October (although reporting itself only starts in 2018) will also catch many businesses within the sector, as they apply to organisations with 250-plus employees.
Complying with the charter
In order to set reasonable targets signatories will first need to assess their current gender balance, particularly at senior levels, look at their promotion pipeline, and assess any current barriers to female progression. Although larger firms and those with active diversity programmes may have this data available and may well already have targets in place, for some this will be a significant exercise in itself. Signatories will also need to consider carefully how detailed their reporting will be and what it will cover, given the flexibility of the charter.
Determining how to link board bonuses to achievement of the targets is not a straightforward exercise. It will entail consideration of existing bonus schemes and how far they may allow such targets to be taken into account. Getting the balance right between achievement of gender balance targets and commercial performance will also require detailed analysis, particularly in light of the requirements of the FCA’s Remuneration Code.
If successful the charter could begin to unlock the tricky issue of female under-representation at senior levels, but its success will depend on whether it real buy-in from the board and across the whole business.
Jane Amphlett is a partner in the employment team at Howard Kennedy