Firms have a long way to go on gender equality, says FCA

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Firms have a long way to go on gender equality, says FCA

Speaking at a Treasury committee evidence session today (June 12), FCA executive director of supervision for investment, wholesale and specialists, Megan Butler, said the industry was still at the "early stages" of its "journey".

Ms Butler said although she saw a lot of engagement with gender issues from senior management staff in financial services firms, this did not tell the whole story.

She told the MPs: "Chief executives come and talk to me voluntarily about their diversity and inclusion practices, all of which is great.

"But the backdrop of that is that I also receive a steady stream of horrifying whistle blows that would indicate pockets of truly toxic cultures that operate sometimes within the same institutions that are coming to tell me about the great initiatives that are underway.

"This just shows the journey that has still to be gone through to drive some of these changes through organisations. We're at the early stages."

Ms Butler went on to say that the issue was "not just one for the big banks" as the regulator found bigger firms often had better outcomes than smaller financial services companies, which had further to come still.

Last year, the committee produced a report on Women in Finance which said bonus negotiations should be scrapped and flexible working should be encouraged to amplify the progression of women to senior positions in the financial services sector.

The report also criticised the 'alpha male' culture in financial services, including the presenteeism and bonus negotiations.

To address this, the committee said bonuses should be assessed in a formulaic way against clear objectives and senior staff should lead by example in flexible working.

Discussing the impact of the report in today’s evidence session, chairwoman of the committee Nicky Morgan asked whether these issues had been addressed in the financial services world and pushed to pinpoint what more could be done.

Ms Butler said the FCA had looked at the remuneration of employees, especially at banks.

She said: "We’ve seen everybody move to balanced score cards, which assess not just what you do but how you do it.

"But I would observe that it’s much harder when you drill into that to find examples where people have been rewarded for good behaviour rather than penalised for bad behaviour."

She said the FCA had written to the chairs of such banks to ask whether they understood the gender pay gap in an attempt to drill into this set of issues.

The regulator asked the firms whether they had objective bonus criteria that were being fairly, appropriately, and transparently applied and that when employees got their bonus, they could understand exactly what it was telling them about their behaviour.

She said the regulator had found some progress and the industry was moving in the right direction on this, but there was more to be done to "incentivise good behaviour" rather than "penalising bad".

But Ms Butler said the work the Women and Equalities committee had done and the publicity surrounding it had illuminated the problem and had had a direct impact on the industry.

She said: "It’s been hugely important. We have some direct evidence on this.

"I gave evidence to the Women and Equalities committee last year. The publicity led directly to a tick up in whistle blows to use about the issues we talked about and were publicised by the interest of the committee.

"It’s hugely important the focus stays."

Corinne Carr, independent remuneration consultant at PeopleNet, who was also at the hearing, noted that the Treasury's Women in Finance Charter asks financial services firms to commit four pledges, one of which was to promote gender diversity, by having an intention that the pay of the senior executive team is linked to delivery on these targets.

She said the "intention" part of the wording had been interpreted as optional by firms and that this was amplifying the problem.

The Women in Finance Charter was introduced as a voluntary initiative in 2016 to improve the representation of women in finance.

It asks firms to set internal targets for gender diversity within senior management including the appointment of a team member responsible for progression and inclusion.  

Organisations are also expected to publish annual reports detailing target progress and harbour an intention for the senior executive team’s pay to be linked to delivery against the diversity targets.

The FCA has also signed up to the charter.

imogen.tew@ft.com

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