Sexism in the City: time for change
Click the image to access a PDF of our Diversity and Inclusion framework
Last week the Treasury Committee published their latest report and recommendations on their inquiry into Sexism in the City. The findings overwhelmingly show very little has changed since the previous review in 2018 and the barriers faced by women in the City persist.
Whilst focussed on Financial Services, the findings and recommendations are relevant to all firms and sectors grappling with how to improve their D&I performance, and ensure these changes are made and supported by a sustainable, positive corporate culture.
The recommendations to accelerate progress and tackle some of the core issues focus on four core topics – diversity and inclusion (D&I); barriers facing women; pay; and sexual harassment.
Below, we explore the Committee’s recommendations on D&I and highlight what Boards and Senior Management should be thinking about as a strategic priority and ahead of final rules from the FCA on D&I and non-financial misconduct expected later this year.
Keep an eye out in the coming days for more from us on the other recommendations and areas firms can take action on.
We’re currently helping a number of firms who have taken proactive steps on their diversity and inclusion strategy. Our framework and underlying methodology is helping firms take bite-size, practical steps towards achieving larger strategic change. The FCA has made it very clear that this is a priority focus area for them - don’t be left wanting when questions are asked….
Diversity and Inclusion (D&I)
“Firms that perform best on diversity and inclusion and have the best cultures should be able to benefit from the clear business advantages this provides, leaving those that perform badly in these areas to suffer the consequences for their reduced competitiveness and profitability.” House of Commons Treasury, Sexism in the City: Sixth Report of Session 2023-2024 (2024)
Recommendation 1: Extend the scope of the voluntary Women in Finance Charter to cover female representation at different levels of seniority.
Whilst promoting female representation at the most senior levels of business is important and some progress has been seen since the introduction of the Charter, firms need to be looking at all levels to ensure there is a pipeline of female talent able to progress through the organisation and to prevent firms cannibalising a small pool of senior females from one another.
In their 2022 multi-firm review into how financial services firms are designing and embedding diversity and inclusion strategies, the FCA found that firms were focussing most on improving representation at senior leadership level despite data showing that the biggest drop-off in representation is from junior to middle management grades.
Even more sobering is Government data, highlighted by the Financial Services Skills Commission, which indicates the total percentage of women working in UK Financial Services has reduced by 8% in the past ~20 years (51% in 2004 vs 43% in 2023) – this equates to a reduction of approximately 100,000 women in the sector since 2004.
Firms should analyse recruitment, promotion, and turnover data across all levels to pinpoint where they're falling short in attracting and retaining female talent. This will support targeted actions to boost diversity across all seniority levels and guarantee a sustainable pipeline of female talent.
Recommendation 2: Make the link to executive pay a firmer commitment under the Women in Finance Charter, on a ‘comply or explain’ basis.
One of Charter’s four core principles is for firms to have an ‘intent’ to link pay to delivery on gender diversity targets. Whilst there has been much public debate on the efficacy of linking executive remuneration to ESG initiatives, incentivising improved D&I performance through variable remuneration is likely to increase focus on the topic at the most senior levels of the organisation.
When setting such targets, firms must ensure they are specific to the organisation and require clear demonstration of proactive steps taken to meet such targets and avoid achievement by default (e.g. female representation increasing due to the sale of a part of the business with a large number of male staff). Targets should also be reviewed on an annual basis to ensure their ongoing appropriateness.
Investors should also challenge firms on the achievement of these targets, seeking greater transparency on how they are determined and reported on to ensure they are credible and designed to support real change.
Recommendation 3: Regulators should drop their plans for extensive data reporting and target setting.
In CP 23/20, the FCA set out a range of proposals on requirements for regulated firms targeted at improving D&I across Financial Services. One of the key proposals was a significant regulatory reporting requirement on D&I data from firms with >250 staff.
The Committee felt this was too burdensome for firms and likely lead to more ‘tick-box’ compliance instead of supporting the change required. By having the threshold for the more burdensome requirements set at >250 staff, many smaller firms (which the inquiry heard evidence on having some of the worst cultures and levels of diversity) would fly under the radar missing a significant population of higher risk in the sector.
Whilst the FCA may take onboard the Committee’s recommendation and remove the regulatory reporting obligation, Boards and Senior Management should not immediately drop any plans to improve D&I data and reporting internally. Another key finding of the FCA’s 2022 review into D&I approaches was that firms’ D&I strategies were not consistently based on a clear diagnosis of their specific circumstances and challenges, which can only be identified by gathering and assessing internal D&I data. Without knowing the firm’s D&I profile (and not just looking over the fence and comparing to others in the sector), actions and initiatives may not be appropriately focused. In addition, the review found that even where actions and initiatives were being taken, there was little supporting evidence to show the efficacy of such measures was being tracked, reported and acted on. Whilst the devil is always in the detail, there is truth in the saying what gets measured gets managed.
Conclusion
The overarching message on the Committee’s findings and recommendations on D&I is that Boards and Senior Management should treat firm-level initiatives for improving D&I with the same level of priority and focus as other core business initiatives, recognising the competitive advantage a truly diverse and inclusive workplace brings.
By understanding the nuances of female experiences and employment lifecycles in your organisation you can better equip yourself to drive forward the change required.
We’d love to discuss our culture and D&I framework (click the image at the top of the page) and how we can support you in taking the next steps to drive positive change in your firm. Contact us – jenny@avyse.co.uk
