Diversity and Inclusion  

Will regulatory intervention improve diversity results?

While the focus may have shifted towards D&I, this re-alignment of priorities arguably makes culture change even more important. Ultimately, the end goal is to promote a shift towards healthy cultures that are diverse and inclusive.

What’s more, coming hot on the heels of the Senior Managers and Certification Regime's push for accountability and the advent of the new consumer duty, this initiative marks the latest in a series of policy changes that act as a catalyst to help companies drive deeper cultural transformation from within.

What can we expect moving forward?

Given that the pace of change has been disappointingly slow, the publication of this paper can be seen as a reboot, and re-assertion, of the regulators’ push for meaningful change.

A number of actions are being considered to kick start the next phase. These range from new regulatory reporting requirements on employee diversity data, to policy options focused on ‘tone from the top’, as well as other company-wide policy and procedures.

Having said that, the FCA is also well aware of the drawbacks of regulatory overload, with much of its Transforming Culture initiative stressing the importance of supervision and company-led change over hard-and-fast rules when dealing with organisational culture. The regulator has historically been reluctant to prescribe a boilerplate strategy for all businesses, instead wanting to encourage organisations to find a culture that fits their own purpose and business strategy.

And then there is always the unintended consequences any regulatory intervention could bring, which the FCA and companies alike would ideally like to avoid – for instance, delayed action due to waiting for a final regulatory view.

So, is it possible to solve the diversity equation without formal regulatory intervention?

So far, the results have not only been below expectations, but the efforts themselves have often been too one-dimensional and narrowly focused. And this lack of meaningful company-led change appears to have left the regulators with no other option but to intervene.

The balance between encouragement and enforcement

The main question for the FCA to wrestle with now is: how effective could any new rules feasibly be in driving the progress that is so clearly required?

While new impetus of some kind is clearly warranted, it is equally the case that a wave of new standards could quickly become yet another box-ticking exercise that fails to address root causes. And the last thing businesses need is more hoops for compliance departments to jump through that only serve to distract from meaningful grassroots change and fail to engage the wider business.