In the FS sector there is now a strong focus on firms’ diversity, inclusion and board composition and how internal structures and behaviour help or hinder a firm’s progress. But what about the behaviour of third parties? What legal protection is there, if any, for those affected? What does the regulator, the FCA, expect from firms? We’ll consider all of that.
This is something that Anne Sammon has flagged up in her recent article for Outlaw: ‘Diversity, inclusion and harassment: how UK financial firms should tackle third party behaviour.’ It was prompted by the media coverage of the inappropriate’ remarks made by some of the investors at the recent annual general meeting of financial services firm Aviva. As the FT reported at the time, the comments were directed at CEO Amanda Blanc who joined the firm July 2020 as its first female chief executive. It was during the company’s first in-person AGM since the start of the pandemic that one investor suggested that Blanc was “not the man for the job”, while another asked whether she should be “wearing trousers”. It’s worth adding, Aviva’s chair, George Culmer, did react to that. At the end of the meeting he called out the remarks and said he did not want to hear them at any future AGM.
As Anne points out, currently there is little legal protection for employees who are faced with these types of issues. The UK’s legislation making companies liable for harassment of their employees by third parties which was included in the Equality Act was repealed in 2013 - part of the coalition government’s ‘red tape challenge’. It means these days employees wishing to stand up against harassment either have to argue that their company’s failure to take action in relation to the harassment is an act of discrimination, or to run arguments that the failure is indirect sex discrimination.
So let’s consider how that might work, and what the FCA is expecting from firms. Earlier Anne joined me by video-link to discuss both points. First, the legal protection:
Anne Sammon: “So, I think although there's not the direct protection that we would have had with those third-party harassment provisions there is still the option of employees raising it as a grievance, because it's something that would impact their working environment. So, there's nothing to stop them raising it through that route, and then when we come to looking at things like litigation, there's the possibility, depending on all the circumstances, of maybe running some sort of indirect discrimination claim. So, you might be able to argue, for example, that an employer has a policy, practice criterion or provision that means that they don't tackle these issues and these issues are more keenly felt by those with that particular protected characteristic because they are the target of the harassment, and it will then become a matter for the employer to have to objectively justify why it takes the approach that it does.”
Joe Glavina: “So what is the FCA expecting from firms, Anne?”
Anne Sammon: “So, we know that the FCA in particular of all the regulators at the moment is really focused on the culture of firms and diversity and inclusion and, therefore, ignoring all the legal issues here, one of the things that firms need to be aware of is that the FCA will have an expectation that they are creating environments in which individuals can thrive and in which customer interests are at the forefront and so if there's a suggestion that that an employer is allowing a culture of harassment to exist, or isn't taking steps to prevent that, you can see that the FCA might become interested in that from a cultural perspective, and also to understand what the potential customer impact of that type of environment might be. By way of example, you know, if you've got somebody who is known to harass other employees, those other employees might be less kind of inclined to go and ask questions of that person, or to seek information that might actually be beneficial for clients to know, so there can be a really close connection actually, between harassment, bullying, discrimination, and the potential impact adverse impact on customers which is what the FCA historically has always been really concerned about.”
Joe Glavina: “The FCA recently finalised ‘comply or explain’ diversity rules for listed companies but they don’t address this third party issue. Why is that? Is it an oversight?
Anne Sammon: “So, it's not clear whether it's an oversight or not yet. We had the FCA, PRA and Bank of England diversity and inclusion discussion paper that was published last year. We are expecting to see a consultation paper coming out in the next couple of months on the same topic and so it's going to be interesting to see whether that addresses the issue of kind of third party harassment, what firms need to think about in terms of diversity and inclusion of their suppliers, for example, and it may well be that the paper addresses all of those, or it may be that the FCA has kind of deliberately or accidentally ignored these issues.”
Anne article which looks at this in more detail is ‘Diversity, inclusion and harassment: how UK financial firms should tackle third party behaviour.’ You can access that from the Outlaw website.