A UK Treasury committee has found only marginal improvement in addressing institutional inequality and a disappointing lack of progress on sexual harassment and bullying, calling on the Financial Conduct Authority to publicise its whistleblowing line to encourage the reporting of misconduct but suggesting it should abandon plans for wider data reporting.
The Sexism in the City report finds that a “fear factor” persists around reporting sexual harassment, which is more prevalent in financial services than in other industries. With bad culture predominantly to blame, respondents to the inquiry also uncovered inadequate internal whistleblowing procedures pertaining to allegations of harassment.
Male perpetrators of harassment and abuse often suffered few consequences, while outcomes for women who reported harassment were usually negative, say campaigners. Advocacy group Can’t Buy My Silence told the inquiry that 77 per cent of workers who encounter harassment or bullying in the workplace do not formally report it, 17 per cent higher than the rate of non-reporting in other industries.
Victims must be empowered to speak up about unacceptable behaviours to “create cultures of accountability”, said Rosie Turner, co-founder and co-CEO of InChorus Group, a provider of tools and anonymous reporting solutions that help organisations improve diversity and inclusion. “To create meaningful change, we need to see companies reviewing and replacing outdated reporting processes and tools with speak-up platforms.”
The report shines a light on the “pervasive culture of sexual harassment and misogyny” that prevails, according to Turner.
The Financial Conduct Authority received 280 whistleblowing reports in the third quarter of 2023, containing 794 allegations in total. Reports about culture were widespread, second only to compliance.
Companies must tackle the “softer end” of abusive behaviour and “microaggressions” against women to create an inclusive culture, whereby even low-level bullying or harassment is deemed unacceptable, says the Treasury committee report.
While more internal training at companies is needed, wider regulatory efforts to address sexism systemically do not go far enough and may even take an unhelpful approach, according to the committee.
Not just ‘tick box’ exercises
Part of the FCA’s and Prudential Regulatory Authority’s existing proposals require that firms implement strategies, collect and report data, and set targets.
But such requirements could be costly for firms to implement and have unclear benefits, says the report, while still failing to influence the “worst cultures and levels of diversity” at many smaller firms.
It raises concerns that these requirements also risk becoming little more than another “tick box” compliance exercise with negligible impact on cultural change.
Regulators should “drop their plans” for extensive data reporting and target setting; the market itself should be able to solve the lack of diversity without such extensive regulatory intervention, according to the committee.
Instead, it recommends that financial services firms — particularly private businesses, hedge funds and other smaller firms — should sign up to the Women in Finance Charter, founded in 2016.
As of June 2023, more than 400 firms were signed up to the charter, up from 205 firms in 2018. The inquiry found the charter had helped drive the conversation about diversity in financial services and increased accountability in the organisations that had signed up.
Still, in January 2024, Baroness Charlotte Vere, parliamentary secretary at the Treasury, made clear that the Treasury has no plans to make the charter more than a voluntary exercise for firms.
There is no silver bullet to tackle the “old boys’ club” of the financial services sector in the UK, says the Treasury committee report, urging faster pace on government initiatives and more effective efforts from regulators.
Seventy years to close the gap
With firms continuing to treat diversity and inclusion as a “tick box exercise”, the culture of the City’s financial sector in particular remains to blame for limited progress and is the most difficult area to successfully reform, the committee found.
The UK’s financial services industry — which has the widest average gender pay gap of any sector, according to the report — employs more than 2.5mn people; at least 1.1mn in financial services directly and more than 1.3mn in related professional services.
In the 2022-2023 reporting period, the average pay gap within financial services was 23.7 per cent, compared to 11.7 per cent in all other industries. Progress since the start of gender pay gap reporting in 2017 remains slow, reducing by only 1.7 per cent over six years in financial services firms, compared to 1.1 per cent for all other industries, according to the report.
Based on this trajectory, it will take at least 70 years for the gender pay gap to close in financial services, the committee suggests, with large banks among those with some of the widest pay gaps.
To improve pay transparency, the Treasury committee has also called on the government to introduce legislation to mandate the inclusion of salary band information on job advertisements, and to ban prospective employers from asking for salary history as part of the job application process.
But it may take longer to address poor workplace cultures, unconscious bias and the impact of maternity leave and childcare, which continue to generate pay inequality.
These factors have hindered progress on the number of women in senior positions, too, with the average proportion of women holding senior management roles increasing from 27 per cent in 2016 to just 35 per cent in 2022.
This is far from unique to the UK. March 12 marks Equal Pay Day in the US, symbolising the number of days women must work into the current year to earn the same amount of money made by men in the previous year.
Research from Alex Imas, professor of behavioural science and economics at Chicago Booth School of Business, proposes a different approach to measuring discrimination, recognising the limitations of traditional economic measures.
In a study conducted by Imas, 800 people played different roles: workers, recruiters, and hiring managers. Workers revealed their gender and completed tasks, while recruiters, knowing the genders, determined salaries and chose workers.
In the scenario, hiring managers offered male workers wages nearly double those of female workers. Salary offers to men were 41 per cent higher than to equally qualified women. Male employees earned $1.41 for every dollar their female counterparts made, reiterating not only the presence of discrimination but the need to address culture in stymieing it.
