Women in the City - Treasury Contents


Summary



The recent financial crisis has shone the spotlight upon the City of London and the need for reform to increase financial stability. Whilst most of the discussion has inevitably focussed on issues such as the structure of the banking sector, changes to the regulatory regime for banks and the bail-out of the banking system, there has also been a lively debate about changes to corporate governance to improve governance and oversight within large financial institutions.

Part of the debate on corporate governance in the City of London has been around diversity and the need for challenge. In general women are in the minority at senior levels in financial institutions—especially at the top. The boards of FTSE 100 banks are only 9% female and the proportion of women executive directors is even lower at 1-2%. We believe the lack of diversity on the boards of many, if not most, of our major financial institutions, may have heightened the problems of 'group-think' and made effective challenge and scrutiny of executive decisions less effective.

Professor Charles Goodhart even suggested that greater female representation at senior levels would have made the banking crisis less likely. Whilst this may be going too far, a sector which is failing to properly utilise the talents of over half the population clearly has substantial room for improvement. This entails looking more widely at the industry structure, to ensure that able women who wish to progress are not held back, which is why this Report also examines matters such as the long hours culture, the working environment and access to flexible working and family-friendly practices.

Much of the legal framework that should support women has already been put in place; there are areas that may need to be strengthened, but steps are being taken to do this. The challenge is not so much to change the legal framework, but to change practice and, where necessary, culture. The onus is on the City to demonstrate that it is committed to improving the representation of women at senior levels within the industry. Whilst we do not believe this should be achieved through the introduction of a quota system, it is clear that such pressure will intensify should the industry fail to act. When she gave evidence, the Minister for Women and Equality told us she was working with the CBI "to develop a pledge, so each company will pledge to increase the number of women it has at the top level and ensure that there is more equality of opportunity within their company". Since she gave evidence, we have been told that "the CBI felt the time was not right to pursue objectives of formal mechanism." However, on 26 February, Lord Davies of Abersoch, the Minister for Trade, Investment and Small Business, wrote to the Financial Reporting Council proposing that listed companies should be required to explain

      what the current position is with regard to director posts occupied by women
    and other underrepresented groups;

      how this meets the needs of the company, its governance and business; and

      what their policies are for achieving greater diversity in the boardroom.

In addition, the Government Equalities Office called for the provisions relating to the appointments of new directors to the board to be strengthened to ensure there was no implicit bias against underrepresented candidates. It is disappointing that the CBI no longer appears to be working on a voluntary pledge to encourage its members to increase the number of women employed at senior levels. We note that the changes proposed to the Corporate Governance Code would, of course, involve compulsory reporting rather than the voluntary action a pledge would entail. We recommend the FRC should respond rapidly to these suggestions.


 
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Prepared 3 April 2010