A hundred years ago British women battled for and won the electoral vote through the Representation of the People Act of 1918. The Act granted the vote to men over the age of 21 and women over the age of 30 who met property criteria. It would take until the Equal Franchise Act of 1928 for women to achieve the same voting rights as men. Equality and diversity issues are still making the headlines across many sectors. Diversity and inclusion are increasingly on the corporate agenda, with research showing that it leads to better decision making and financial performance. A lack of diversity has contributed to financial scandals through the impact of ‘group think’ and the lack of challenge. Equally, firms who do not embrace diversity are missing out on talent and are less able to relate to their customers.
Diversity and inclusion have an impact on how the industry is perceived by customers, investors, staff, government, and regulators and therefore poses a reputational risk. Government sponsored reports have focused on this subject and HM Treasury’s Women in Finance Charter has turned the spotlight on gender diversity in the financial services sector. There are initiatives including the 30% Club campaign aimed at increasing the number of women in executive positions. The campaign is asking FTSE 100 firms to commit to increasing the proportion of women in senior roles to 30% by 2020.
Risk and regulation
The risk caused by a lack of diversity in financial services has been recognised by the Financial Conduct Authority. In an interview with Financial News in December 2017 CEO, Andrew Bailey said “You can point to the experience of the last 10 to 20 years where problems have been exacerbated by a lack of diversity.”
The Financial Reporting Council UK Corporate Governance Code (the Code), highlighted the importance of inclusion and diversity at board level. In proposed changes to the Code, detailed in the December 2017 consultation paper, FRC states “It is, therefore, essential for boards to be made up of competent, high- calibre individuals who, together, offer a broad mix of knowledge, skills, experiences, backgrounds, and personal strengths, including women and individuals from different social and ethnic backgrounds.” The revised Code also encourages, for the first time, diversity across the workforce and the development of a diverse executive pipeline. Stephen Haddrill, Chief Executive of the Financial Reporting Council said, “A diverse workforce contributes to more integrity in business and the long-term success of organisations which in turn leads to sustainable growth in the UK economy. In our review of the UK Corporate Governance Code we are strengthening its
diversity principles and provisions.”
The gender pay gap reporting regulations came into effect 6 April 2017, requiring all organisations in Great Britain with over 250 employees to report on their gender pay gap publicly both on their website and on the Government site, by no later than 4 April 2018 for private and voluntary sectors. About 9,000 companies are expected to be required to report and the vast majority are yet to do so. Companies will be required to report annually to show trends. The UK government says it will also publish sector-specific league tables, highlighting companies failing to address pay differences between men and women.
According to Government statistics, women earn on average 18% less than men in the UK today. This is a measure of the difference between the average hourly earnings of men and women.
Gender pay gap should not be about pay, it is not about firms failing to offer equal pay for equal work, which has of course been unlawful since the 1970’s, although firms will wish to continually review their data to identify and address any issues. It is possible to have a significant gender paygap while at the same time being fully compliant with Equal Pay legislation. It has been described as a “Gender Role Gap” and is the result of a number of factors, economic, cultural, societal and educational. Women tend to have more unpaid caring responsibilities and more often work part- time. In the UK there is also occupational segregation, which has a cultural element, for example in Russia over 30% of engineers are women; in the UK the figure is 11%. This disparity starts at an early age when girls drop out of STEM (Science, Technology, Engineering and Maths) subjects earlier than boys. According to the National Audit Office in 2016/17 50% of apprenticeship starts were female, but they accounted for only 8% of STEM apprenticeship starts. It seems likely that the gender gap in maths and technology is related to the under representation of women in financial services.
The latest research has indicated that the gender pay gap in financial services is significantly higher than the UK average. According to analysis by the Sunday Times of the figures published by early March, the pay gap in financial services was 27.1% and the bonus gap 55%; the highest of all sectors. These differentials are expected to increase once the sectors within financial services with traditionally low levels of diversity, such as investment banks, begin to report. Failure to tackle the gender pay gap will damage the industry’s reputation both internally and externally and could potentially make it more difficult to attract women to the sector in the future.
The new reporting requirement will require additional work by companies but they also provide an opportunity to engage senior managers in the diversity and inclusion debate. Before looking at solutions it is important to know what the gender pay gap is within your company and what are the underlying causes. The starting point is an analysis of your data, in order to identify where within your firm are the biggest gender pay gaps.
In financial services the data is likely to reveal that women tend to occupy the less senior, lower paid roles. The challenge will be to address this, placing the focus on recruitment, retention and succession planning. Companies will need to review their talent management procedures and processes throughout the employment life cycle.
- Adopt new recruitment practices to address bias, introduce skill-based testing and structured objective scoring.
- Recruit through a wider variety of sources, non- traditional backgrounds and education, work experience, returner programmes
- Are you gender blind, are your job adverts gender neutral?
- If there are particular roles where you have a gender imbalance do you have plans to address this?
- Design jobs to be flexible- part-time, job share, home based.
- Monitor recruitment outcomes by gender, job level and job type.
Promotion and reward
- Review succession and leadership assessment criteria to ensure they are free from bias.
- Review performance rating distribution by gender.
- Ensure you have documented practices and training to support, performance. management, job evaluations, promotion criteria, job moves, development opportunities and pay.
- Introduce sponsorship schemes.
Culture and Role Models
- Consider your employer brand and highlight flexible working initiatives, mentoring programmes, reverse mentoring initiatives and work-life balance.
- Address the image of the industry and show case its social benefit to broaden its appeal as a career
- Introduce mentoring, sponsorship and development programmes.
- Champion flexibility by promoting role models in senior roles, both men and women
- Support individuals returning to the industry through returner programmes, including at senior levels.
- Consider flexible working practices and highlight the promotion of flexible workers.
- Review the support you provide to employees with caring responsibilities. Maternity and paternity leave.
Gender diversity is currently in the spotlight but going forward the discussion is likely to move to wider diversity and firms will need a strategy to keep pace with this, making the industry more diverse and building an inclusive culture. Firms are already reporting on their ethnicity pay gaps with the figures reflect a lack of ethnic minority staff in senior roles. We need to start from schools and continue to makes changes through to the workplace. We need to ensure that we have a workplace that works for a diverse workforce, helping everyone to reach their full potential.