A number of leading banks, including Lloyds Banking Group, Barclays, HSBC and The Royal Bank of Scotland, have pledged to tackle gender imbalance in the UK financial services sector by signing up to a new voluntary charter.
The Women in Finance Charter (Charter) was launched by HM Treasury following recommendations made by Jayne-Anne Gadhia, Chief Executive of Virgin Money, who recently carried out a review into the representation of women in the financial services sector (Review).
The aim of the Charter is to increase the number of women in senior leadership positions. Firms which sign up to the Charter commit to implementing the recommendations set out in the Review.
The Review reveals that financial services firms employ more women than men but only a few women progress beyond middle management levels, leaving most of the top jobs in the hands of men. At entry level 66 per cent of recruits are female but this drops to 33 per cent at middle management level and to 18 per cent at senior management level. On average women make up 23 per cent of boards in the financial services sector but their representation on executive committees amounts to only 14 per cent, while 25 per cent of the companies sampled had no women at all on their executive committee and nearly 17 per cent had no women on their board.
Where women do sit on executive committees they tend to be in corporate support functions such as human resources, communications, legal and compliance, marketing, treasury, audit, policy and public affairs rather than business-facing (profit and loss) roles. Whilst the sector has the highest pay in the UK it also has the widest gender pay gap, which currently stands at 39.5 per cent. The Review recognises that meaningful change in gender equality is only likely to happen if businesses start to measure it. What gets measured gets done.
To that end, recognising that each business will have its own priorities and requirements, the Review makes three overarching recommendations:
- Reporting – firms should set their own internal targets, against which they should publicly report progress;
- Executive accountability – there should be an executive responsible for improving gender diversity at all levels of the organisation and in all business units;
- Remuneration – executive bonuses should be explicitly tied to achieving the internal targets which firms have set. It would be up to individual institutions to determine how they do this.
The government strongly believes that these recommendations will be key to driving change. Each firm signing up to the Charter will be expected to set out its approach to each of these three recommendations and report on progress against targets either in its Annual Report and Accounts or in a prominent and signposted place on its website. Firms have been asked to sign up to the Charter on a voluntary basis.
After three months HM Treasury intends to publish a list of signatories. If large sections of the industry do not engage with the recommendations then government may need to examine whether a more prescriptive approach is required. Aside from the main recommendations, the Review also identified other positive actions which could be taken to improve inclusion in the workplace.
These key enablers include:
- investing in supportive people managers
- providing technology to support flexible working
- ensuring pay structures are transparent; and
- implementing good flexible working policies.
The big question is whether the Review and the Charter will succeed in bringing about change. Signing the Charter is entirely voluntary and the proposals do not have the force of law. Cynics may argue that even if firms do sign up to the Charter they may set themselves unambitious targets in order to ensure that they are achievable and do not have an adverse impact on board bonuses. On the other hand many high profile diversity groups and many senior women are against legally binding quotas as it is felt that they misfire and do not lead to a genuine acceptance of diversity in leadership.
International banks may be reluctant to sign up if this means that they have to commit to introducing practices in this jurisdiction which they do not want to implement elsewhere.
The fact that a number of leading banks have already signed the Charter is however encouraging. Institutions which have not yet signed up run the risk of being named and shamed in the press and this could prove a powerful incentive. Investors may also play a part in lobbying firms to consider more women at board level. According to the Daily Telegraph, big investors, such as Aviva and L&G, have already been quietly lobbying on this front.
The Review is just one part of the government’s overall commitment to tackling gender inequality in the workplace. Recently the government committed to addressing gender pay gap through requiring every company with more than 250 employees to publish the difference between the average pay of their male and female employees. Sir Philip Hampton, the Chair of GlaxoSmithKline, was also recently appointed to lead an independent review on increasing representation of women in the Executive level of FTSE 350 companies.
It seems that the tide is turning. It will be interesting to see how many banks and financial services firms sign up to the Charter over the next three months and what positive steps they take to increase the number of women in senior positions.