Sexism in the City – Report Summary

Summary

The financial services industry is one of the most important sectors of the UK economy. Employing more than 2.5 million people across the UK—over 1.1 million in financial services directly and more than 1.3 million in related professional services—and supporting lots of well-paid jobs, the sector makes a disproportionately large contribution to UK GDP and its £100 billion tax contribution helps fund public services. It is vital therefore that the sector makes the most of the widest possible pool of talent to ensure it is as productive and competitive as possible.

Our predecessor Committee in 2018 highlighted the underrepresentation of women in senior positions and the large difference in average pay between men and women in the well-paid sector. It identified a range of barriers faced by women in financial services that contributed to this gender inequity, including poor workplace cultures, unconscious bias and the impact of maternity leave and childcare. The report made a range of recommendations aimed at reducing these barriers and improving gender diversity.

Five years on, we launched our current inquiry into Sexism in the City to find out how much had changed. Disappointingly, the answer appears to be “not much”.

Many of the barriers identified in 2018 remain stubbornly in place. We heard that many firms still treat diversity and inclusion as a ‘tick box’ exercise rather than a core business priority, despite clear evidence that diverse firms achieve better results. There have been only incremental improvements in the proportion of women holding senior roles in financial services firms, and some sectors have seen no improvement at all. Similarly, there has been only a small reduction in the average gender pay gap in financial services, which remains the largest gender pay gap of any sector in the UK economy.

It is shocking to hear how prevalent sexual harassment and bullying, up to and including serious sexual assault and rape, still are in financial services, and how poorly firms handle allegations of such behaviours. We were particularly concerned to hear of the widespread misuse of non-disclosure agreements (NDAs), which have the effect of silencing the victim of harassment and forcing them out of an organisation, while protecting perpetrators and leaving them free to continue their careers and go on to abuse others.

As in 2018, the overarching problem behind all these issues is that of impunity for perpetrators and culture, and the limited progress since 2018 can largely be ascribed to a lack of cultural change in the sector.

First and foremost, responsibility for tackling these issues and driving much-needed cultural change has to sit with the senior leadership and boards of firms. Firms need to consider what diversity and inclusion initiatives will have most impact, drawing on best practice from those that are achieving success, and implement those initiatives with the same rigour as other core business priorities. Firms should see success in this area as not only a moral imperative but a competitive advantage in the attraction and retention of talent. Investors also have a key role to play in holding firms to account for their performance on diversity and inclusion and pushing for greater change.

Firms also need to embed a zero-tolerance culture towards harassment and bullying in the workplace. They should ensure there are robust processes in place to investigate allegations of harassment, with perpetrators of abuse, rather than their victims, suffering negative consequences. Men need to take a more active role in challenging and reporting sexual harassment by other men, as well as in improving cultures more broadly.

Looking beyond industry, the Government and financial regulators have important roles to play in driving change and combatting sexual harassment and bullying. A workplace should be a safe place for all employees to flourish. The elimination of sexual harassment including serious sexual assault, and bullying, should be a minimum standard expected to be guaranteed across the sector. It is a source of deep concern to us that this has not yet been achieved. This needs to be addressed and urgently.

Two of the Government’s flagship initiatives on gender equality are the gender pay gap reporting regulations introduced in 2017 and HM Treasury’s Women in Finance Charter introduced in 2016. Both have been successful at increasing transparency and driving conversations, but neither has brought about the extent of change that was hoped for. We therefore recommend various enhancements to increase their effectiveness. On the Charter, these include extending its focus beyond just the top level of senior management to encourage firms to nurture a pipeline of female talent at all levels. On pay gap reporting, our recommendations include requiring firms with pay gaps above a certain level to produce action plans on how they will reduce them. We are also recommending that the Government takes action to encourage greater pay transparency, including by discouraging firms from asking job applicants for their salary history, which perpetuates the gender pay gap and is outlawed in many other jurisdictions. We welcome the Government’s efforts to tackle the misuse of NDAs and recommend that it introduces legislation to ban their use in harassment cases.

We welcome the proposals by the Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA) to strengthen their non-financial misconduct rules and enhance their ability to take action against individuals in sexual harassment cases, including to prevent ‘bad apples’ from being able to roll from job to job as they are able to do currently. The era of impunity for perpetrators of sexual harassment and bullies must now end. The FCA operates a whistleblowing line that can be used to report wrongdoing in the workplace, although awareness and understanding of how it works is low. We recommend that the FCA takes action to publicise the availability of its whistleblowing line and clarify the circumstances in which it can be used. Especially, it needs to be clear nothing in an NDA can prevent someone from reporting misconduct to the FCA or reporting a crime to the police.

When it comes to wider diversity and inclusion, we welcome the focus of the PRA and FCA on this topic and agree they have a role to play, but we are concerned by their proposals to require firms to implement strategies, collect and report data and set targets. Well run firms should be doing this anyway. These costly initiatives with unclear benefits would likely be treated by many firms as another ‘tick-box’ compliance exercise, rather than necessarily driving much-needed cultural change. They would also not apply to smaller firms with fewer than 251 employees where our anecdotal evidence suggests there are worse cultures. We recommend that the regulators drop their prescriptive plans for extensive data reporting and target setting, and instead focus their efforts on ensuring that the boards and senior leadership of firms take greater responsibility for improving diversity and inclusion.

Changing the culture in financial services is a significant challenge that will inevitably take time. Although there is no silver bullet, we hope that the recommendations in this report help increase the pace of change towards a diverse and inclusive financial services sector where the widest range of people can prosper and thrive.