Conclusions and recommendations
Current levels of diversity
1.There is clearly an underrepresentation of women in senior positions in the financial services sector. The gender distribution of financial firms typically follows a “pyramid” model where the number of women diminishes in line with seniority. Furthermore, women are generally better represented in firms’ support functions rather than profit generating functions. (Paragraph 15)
Benefits of gender diversity
2.Research has found that firms with higher numbers of women in senior management positions perform better financially than counterparts with lower numbers of women in senior management, with returns above their national industry median. (Paragraph 22)
3.Some of the benefits of gender diversity cannot be measured quantitatively. Gender balance can be conducive to more “open” discussions where challenge and diversity of thought are welcome. Furthermore, greater diversity for firms serving clients can help them relate to a more diverse range of clients. (Paragraph 23)
4.Notwithstanding the benefits of gender diversity from a business perspective, the representation and progression of women in finance should also be regarded as intrinsically right. The near exclusion of any group within society, intentional or unintentional, is not acceptable. (Paragraph 24)
5.Despite the benefits of gender diversity, the financial services industry falls well short. The number of women represented in financial services companies diminishes in line with seniority. Nevertheless, the Committee is encouraged by the gradual implementation of initiatives by industry and Government to improve on the current position. The Committee will continue to monitor industry and Government policies during this Parliament. (Paragraph 25)
Barriers to gender diversity
6.The culture within an organisation (or across a sector) plays a significant role in ensuring there is a focus on diversity right at the start of the recruitment process, in making women comfortable in their workplace and in women’s ultimate success. (Paragraph 43)
7.The bonus culture in the financial services sector remains a deterrent for women and many are disadvantaged by it. The Committee believes it would be best practice to move to a system where performance bonuses are assessed against clearly objective and formulaic criteria. The Committee recommends that all firms in the sector consider this approach. (Paragraph 44)
8.The culture of presenteeism in the financial services sector may deter women from progressing to senior levels. This culture can be changed through greater use of flexible working practices. However, flexible working will not help if the attitude within firms is that flexible working means lower productivity. Therefore, a change in attitude towards measuring success by outcome rather than presence is also required. The Committee encourages firms to promote flexible working to all staff but also understand the attitudes surrounding it. (Paragraph 45)
9.Unconscious bias has frequently been discussed as one of the issues preventing women from progressing within the financial services sector. Notably, unconscious bias can influence what is perceived as success, talent and capability, such that other ways of working are overlooked. This can disadvantage those who are in the minority in organisations, including women and others from diverse backgrounds. Firms should ensure staff at all levels—particularly those middle managers involved in recruitment, promotion and talent spotting who might otherwise be reluctant to take risks in recruitment—understand unconscious bias and are trained to be objective when considering talent and capability. Such staff need to be made aware that they are recruiting for their whole company, and not just for one role. (Paragraph 46)
10.Maternity leave can have a negative impact on women’s confidence and many women who return from maternity leave accept roles that are less financially rewarding or more junior than the roles they held previously. Employers can also make assumptions about how women perceive their careers when they return from maternity leave and may not offer them the same opportunities. This approach is clearly unfair and it is important that employers communicate opportunities to women returning from maternity leave, so that women can make decisions about their careers without impediments. Best practice within the industry includes returners schemes and training opportunities. More firms should make these available to women who are coming back into the workplace. (Paragraph 47)
Industry initiatives
11.The Committee supports firms’ initiatives to improve gender diversity in recruitment and promotion, such as ensuring gender balanced shortlists and revising the language used during recruitment. Nevertheless, the Committee recognises that unconscious bias can influence recruitment decisions as firms can be too focused on their culture and the “team fit”. (Paragraph 72)
12.The Committee notes that firms can have unnecessary legacy requirements in their recruitment processes, such as particular academic qualifications or requiring certain hours to be worked or frequent travel to be almost compulsory. The Committee strongly encourages firms to revisit their recruitment policies and practices on a regular basis to ensure that unconscious bias is eliminated at every stage of the process. When revisiting recruitment policies and practices, firms should continue to challenge the language used during recruitment and ensure that stated requirements for roles are actually necessary for performing the roles and are not deterring potential applicants. The Committee recommends that firms’ senior leadership proactively ensures that barriers to gender diversity in recruitment are understood throughout the organisation and are removed. (Paragraph 73)
13.Maternity leave can have a negative impact on women’s careers. It is positive that industry has recognised this issue and is trying to mitigate it by keeping women on maternity leave up to date on live issues in the industry and designing schemes to assist women when they have returned to work. The industry should continue these efforts. The Committee also believes that the Government and employers should improve parents’ awareness of the opportunities to share childcare responsibilities, namely through the Shared Parental Leave scheme. Greater prevalence of men taking childcare responsibilities and parental leave could help mitigate the impact of maternity leave on women. (Paragraph 74)
14.The Committee believes that firms should also consider extending the initiatives to support women during and after maternity leave to employees who have taken time away from work for other caring responsibilities. (Paragraph 75)
15.Some firms are offering opportunities for flexible working. However, this can be perceived as a “female” approach to working which can impact women’s progression negatively. To remove any stigma associated with flexible working, more of those holding senior roles in industry, especially men, should lead by example by working flexibly. The Committee believes that flexible working would bring benefits to the entire workforce as it enables all employees to balance personal responsibilities with their careers. Firms in the financial services sector should reconsider the working hours required for roles. The Committee believes it is unnecessary for some roles in the financial services sector to still be carried out with long working hours based in the office, particularly with modern developments in technology. The Committee recommends that firms consider how roles could be done more flexibly. (Paragraph 76)
16.Many of the efforts made by industry to improve gender diversity have been driven by firms’ leadership. Even though leadership recognises the importance of gender diversity, gender diversity is often not considered a top priority within organisations, displaced by other business concerns. The Committee encourages the financial services sector to consider gender diversity as core to business strategies and to uphold gender diversity as a priority. (Paragraph 77)
17.The Committee recognises the importance of middle management for driving gender diversity The Committee encourages leadership to empower middle management to take risks and challenge their own assumptions and unconscious bias when recruiting and to ensure middle management are appropriately trained to manage more diverse teams. (Paragraph 78)
Government responses
18.The Treasury’s Women in Finance Charter has been effective in raising awareness on gender diversity and initiating change in the financial services sector. The Committee encourages all firms within the sector to sign the Charter and supports the Treasury’s efforts in engaging with the firms who have not signed. The Committee will also continue its discussions with these firms. (Paragraph 115)
19.The Committee recognises that there is a considerable way to go, and supports further industry and Government initiatives to improve gender balance. The Committee acknowledges the Charter is focused on the representation of women amongst senior positions and thus encourages the Government to also consider initiatives to help firms improve gender balance further at all levels of seniority through the finance sector. (Paragraph 116)
20.The Committee recognises the importance of transparency and disclosure in driving the gender diversity agenda. The gender pay gap figures reported for the financial services sector confirm that a large gap exists between men and women working in finance, particularly regarding bonuses. The figures also confirm that there are significantly more men than women in higher earning, and more senior, positions. Firms and the Government now need to analyse the data to identify problems and devise strategies to overcome the gender pay gap and support the progression of women. For transparency, the Committee strongly encourages firms to publish their strategies and report on their progress. Going forward, the Committee will monitor firms’ progress in meeting their targets and review the effectiveness of their strategies. (Paragraph 117)
21.The Committee has noted that over 570 organisations do not have a Standard Industrial Classification (SIC) code alongside their gender pay gap reporting data. In addition, over 300 public sector bodies have simply been listed as public sector, rather than identifying which specific industry or sector they operate in. The companies and public sector bodies themselves were not responsible for submitting this information, it is partly drawn from Companies House records, and partly completed by Government Equalities Office staff. The lack of accurate SIC code reporting renders sectoral analysis of the gender pay gap reporting data difficult, as the codes are crucial for identifying the sectors that organisations operate within. The Committee recommends that the Government reviews the gender pay gap database to identify and correct omissions and errors in order to provide as much sectoral information as possible. (Paragraph 118)
22.The Committee recommends that the Government amends its guidance on gender pay gap reporting surrounding the disclosure of partners’ remuneration to prevent firms from circumventing the spirit of the legislation. For many large professional services firms that are partnerships, partners have a similar status to senior executives and should therefore be included in gender pay gap calculations. Omitting partners’ remuneration could reduce the gender pay gap for these firms, rendering the reported figures disingenuous. (Paragraph 119)
23.The Committee agrees with John Glen that it is “outrageous” that firms are circumventing the spirit of the gender pay gap legislation. The Committee would like to see the Chancellor of the Exchequer become equally vociferous. (Paragraph 120)
24.The Committee also encourages the Government to reconsider whether it is appropriate that subsidiaries of large companies with less than 250 employees are exempt from gender pay gap reporting. This exemption could impact the trends emerging from gender pay gap reporting data and the conclusions drawn. (Paragraph 121)
25.The Government should consider expanding gender pay gap reporting to encompass reporting by job role and by corporate function, to offer greater transparency. (Paragraph 122)
26.The Committee heard that encouraging girls to study relevant subjects at school and to consider the work of the financial services industry earlier in life could be an important step in encouraging more young women to enter the financial services sector. The Government and industry should work with schools, organisations providing further education, and careers organisations such as the Careers and Enterprise Company to facilitate this. (Paragraph 123)
27.Ensuring young women are aware of the variety of career paths within the financial services sector, and where those paths could take them, could encourage them to move away from “support” functions within financial services. In the longer term, this could improve the gender diversity of the sector and reduce the gender pay gap. The Committee encourages the Government and industry to consider how opportunities in financial services can be introduced to young women in their education and career considerations. (Paragraph 124)
28.Shared parental leave was designed to give parents greater flexibility in managing childcare and employment. However, since its introduction, the uptake has been low. The Committee supports the Government’s initiatives to increase awareness of the shared parental leave policy. Following its awareness campaign, the Government should continue to monitor the uptake of shared parental leave and seek to understand the reasons behind the low take up and its wider impact on parents’ career progression, particularly fathers. (Paragraph 125)
29.The gender pay gap reporting by the regulators show that they exhibit similar trends as the rest of the financial services sector. The regulators should continue to implement initiatives to improve their own representation of women at senior positions and reduce their gender pay gap. This will enable them to act as an effective role model to the rest of the industry. (Paragraph 126)
30.The Committee also believes that the Treasury and the regulators should ensure that gender diversity and their gender pay gap are priorities. The Treasury’s Executive Management Board meets on a weekly basis, yet only discussed its gender pay gap six times since May 2017. The Committee recommends that the Treasury and regulators discuss their organisations’ gender diversity and gender pay gap as frequently as they would other priorities. The Minister and Permanent Secretary must make it a personal priority to ensure diverse short lists for all appointments. (Paragraph 127)
31.Going forward, the Committee will continue to challenge the Treasury in its appointment of senior staff at the Bank of England, the Financial Conduct Authority and all other bodies within its remit to ensure a diverse pool of candidates is considered with each appointment. The Committee will also further the gender diversity agenda by obtaining, where possible, gender diverse witness panels. (Paragraph 128)
Other forms of diversity in finance
32.Whilst the Committee’s inquiry has focused on the representation and progression of women in finance, the issue of representation of other forms of diversity within the financial services sector was raised throughout the inquiry. The Committee recognises that gender diversity is only one element of the diversity agenda and the work carried out to promote this is vital; nevertheless, more work needs to be done for the representation of other forms of diversity within finance. (Paragraph 136)
33.The Committee encourages firms to widen their diversity initiatives and consider the representation of other forms of diversity within their organisations. (Paragraph 137)
34.The Committee believes the Treasury should also extend its focus to other forms of diversity in finance. The Treasury should start by understanding its own treatment of employees from diverse backgrounds. (Paragraph 138)
Published: 13 June 2018