
Background
The House of Commons Treasury Committee published a report from its 'Sexism in the City' inquiry on International Women’s Day earlier this month. A predecessor Committee in 2018 highlighted the underrepresentation of women in senior positions and big difference in the pay gap between men and women within the financial services sector. This report also identifies other serious challenges faced by women working in financial services, including poor workplace cultures, unconscious bias and the impact of maternity leave and childcare commitments on career progression.
The purpose of the most recent inquiry and it’s subsequent report was to determine how much had changed since 2018 - MPs were asked to comment on what role the government, firms and regulators could play in combatting these issues. As to the MPs’ assessment of what has changed since 2018, the results appear to be, as the report puts is succinctly, “not much”.
Identified Issues
The report cites that it seems as though the barriers identified in 2018 remain firmly in place, with the following key issues continuing to persist:
- Culture – the report highlights that regulators are too focused on data and target setting in the financial services sector and the real issue requiring attention is the fact senior leadership/boards do not take enough responsibility for diversity and inclusion initiatives.
- Lack of accountability by senior leadership - the report recognises that cultural change takes time, but comments that the pace has been too slow and that more often than not, ‘buy in’ from senior leadership is lacking.
- Diversity and inclusion as a “tick box” – the report found that firms often see diversity and inclusion as a tick box exercise and fail to recognise that it is a “core business priority” despite evidence showing that diverse firms achieve better results.
- Handling of allegations of sexual harassment/bullying – the report comments that it is “shocking” to see how prevalent cases of serious sexual harassment, bullying and rape still are within the financial services sector. It found that there are not typically robust processes in place to investigate bullying and harassment in the workplace and that that allegations are not always taken seriously, presenting a significant barrier to women in the workplace and sometimes forcing individuals to leave firms.
- Widespread misuse of non-disclosure agreements – the report states that NDAs are widely used in the industry to protect firms and individuals from reputational damage and make problems “go away”, rather than punishing individuals appropriately, allowing them to progress in their careers and potentially go on to abuse others.
Recommendations
The report makes a number of key recommendations to tackle each of the identified issues:
- A “zero tolerance approach” – firms need to have zero tolerance towards harassment and bullying, and should implement more robust processes to investigate allegations.
- Buy in from senior leadership – firms should take ownership of these issues and ensure processes are in place to protect victims, and appropriately punish perpetrators.
- Competitive advantage/business reasons – firms need to start seeing improving culture, diversity and inclusion as not only a “moral imperative” but as a key to their success and gaining more of a competitive advantage, as it means attracting and retaining the best talent.
- Role of investors – the report’s contributors highlighted the key role investors could play in pushing for change and holding firms accountable for their diversity and inclusion activities. For example, using their voting rights to effect change in their investee companies.
- Gender pay gap – the financial services sector has the largest gender pay gap of any sector in the UK economy and made a number of recommendations to combat this including; nurturing female talent at all levels, requiring firms with certain pay gaps to produce action plans on how to reduce them, reducing the size threshold of gender pay gap reporting from 250+ to 50+, making it a legal requirement to include salary bands on job adverts and, discouraging a practice of asking candidates for past salary history (which may mean continued lower pay for women).
- Non-disclosure agreements – the report welcomes the government’s efforts to tackle misuse of NDAs and recommends new legislation to ban the use of NDAs in cases of harassment.
- Protection for whistleblowers – it recommends that the FCA takes steps to publicise the availability of its whistleblowing line and clarify the circumstances in which it can be used. In particular, the FCA should clarify that nothing in an NDA can stop someone from reporting misconduct to the FCA or a crime to the police.
- A shift in the regulators’ focus – the report recommends that regulators steer their focus away from “prescriptive” plans for extensive data reporting and target setting. Instead, they should focus on ensuring senior leadership in firms take greater responsibility for improving diversity and inclusion.
The report recognises that changing the culture within financial services is a challenge and will “inevitably take time” as there is no “silver bullet”. It remains to be seen what the impact of this report will be, but MPs hope it provides a catalyst for both cultural and legal change and that the government, firms and regulators take note.
See our articles on tackling non-financial misconduct and key regulatory developments within the financial services sector.