Out-Law News | 23 Mar 2016 | 10:49 am | 3 min. read
Major employers including Lloyds Banking Group, Barclays and RBS have signed a government-backed charter committing to implementing the recommendations of a review of gender diversity at financial services firms, chaired by Virgin Money chief executive Jayne-Anne Gadhia. The Treasury intends to publish a full list of firms who have signed up to the charter after three months.
"It is fantastic that a number of leading banks have already committed to sign up to our new 'Women in finance charter' and I encourage all firms across the sector to follow suit," said Harriett Baldwin, economic secretary to the Treasury.
"Removing the barriers which prevent women from fully realising their potential in the labour market is a crucial part of improving the UK's long-term economic performance. Financial services can lead the way as the sector with the highest pay in the UK and the widest gender pay gap. The widespread adoption of the review's recommendations will help make a genuine difference to gender diversity in financial services," she said.
Research conducted as part of the review found that women made up around 23% of the boards of UK financial services companies, but only 14% of executive committees. At the same time, respondents to an industry-wide consultation exercise said that companies with more women in top executive positions tended to perform better. Gadhia said that low female representation among firms' senior management was "not just about childcare", but rather that women were leaving before being promoted into senior roles "because the culture isn't right".
"As a result, the issue will now be addressed in a way the City recognises," she said. "Make it public, measure it and report on it. What gets published gets done. The social and economic benefits are clear and I look forward to more financial services companies signing up to the charter in due course."
In line with Gadhia's recommendations, charter signatories commit to appointing one member of the senior management team as "responsible and accountable for gender diversity and inclusion", and to setting internal targets for gender diversity in the senior management team. They should then publish annual reports on their websites setting out their progress against these targets. Signatories also commit to "having an intention to ensure the pay of the senior executive team is linked to delivery against these internal targets". Participation is voluntary, but charter signatories must agree to "monitoring and evaluation" of their progress by the Treasury as well as their names being published.
Gadhia's final report sets out a number of actions firms can take to help them get more women into senior management positions. These include transparent pay structures, mentoring and sponsorship schemes and implementing good flexible working policies, backed by investment in technology which supports more flexible working. Firms could also consider equalising paid benefits for maternity leave and Shared Parental Leave to encourage new fathers and partners to take this time off, and invest in innovative 'return to work' programmes for those returning from maternity leave.
Employee incentives expert Graeme Standen of Pinsent Masons, the law firm behind Out-Law.com, said that the findings of the report showed that "real progress can be made if equality targets are backed by concrete measures to change cultures and drive changes to recruitment and promotion practices".
"An effective, realistic and prudent action plan will be complex and demanding to create and implement, however; and the project could involve various risks for each business," he said.
"Compliance with the charter will be voluntary, and businesses have flexibility to craft their own approach – for example, as regards whether senior bonuses will be linked to progress and exactly how - but pressure to comply is likely to continue. For example, the mandatory gender pay gap regulations that will soon be finalised will provide public data on the issue for many of the affected firms, since businesses will probably be required to report the gender balance throughout their workforce, divided into 'quartiles' by levels of pay. The current action on the gender pay gap also presents a warning - the imminent mandatory regulation was preceded by a voluntary approach, but although businesses widely expressed support, there was not enough public disclosure or evidence of progress to forestall regulatory intervention," he said.
Employment law expert Christopher Mordue of Pinsent Masons said that firms that wished to take positive action to address gender imbalance would not face legal barriers to doing so.
"Equality law allows employers to take positive action to address the underrepresentation of women in senior roles, even to favour female candidates who are as qualified for the job as male candidates," he said.
"These powers are not being used to the full and companies in the financial services sector, and beyond, should be asking themselves whether it's time to start taking maximum advantage of these positive approaches to accelerate their rate of progress in closing the gender gap," he said.