Moving the diversity dial
Calls for improvements in the detail and comparability of diversity disclosures are getting louder. Research suggests that greater executive-level commitment to public targets is needed, writes Dawn Cowie.
The starting point for meaningful change in gender equality in the financial services sector is measurement, according to Jayne-Anne Gadhia, CEO of Virgin Money. “Businesses need to measure it; because what gets measured gets done,” she wrote in her foreword to her review of women in financial services, published in March.
Encouraging firms to publish detailed numbers for public scrutiny may be the key to real change. For example, the Gadhia review found that an increase in female representation on boards concealed the underrepresentation of women with executive directorships at a sample of 200 firms active in UK financial services.
While there was 23% female representation on boards, there was only 14% on executive committees and a lack of available information on women in senior management, according to data compiled by think tank New Financial as part of the review. Where women do sit on executive committees, the research found that they tended to be in corporate or support functions.
Variations in reporting of gender imbalances and initiatives to tackle them isjust the tip of the iceberg in terms of gaps in diversity disclosure. New Financial’s analysis of 115 capital markets firms in Europe found that 56% disclosed the total percentage of women in the workforce, while only 12% gave a similar breakdown by ethnicity or disability.
The most commonly disclosed criteria were the percentage of women in management (64%), compared to ethnicity in management (19%) and disability in management (8%). Some other areas of diversity and inclusion where there was a lesser degree of monitoring was LGBT (lesbian, gay, bisexual and transgender), ex-armed forces, parents and carers, work/life balance, social mobility and faith. The big variations in terms of what is disclosed makes comparisons difficult. While 77% of capital markets firms analysed by New Financial disclose some diversity data, only 43% provide historical comparisons and 27% set targets.
A possible model for more standardised diversity disclosure is the UK legal profession. Since 2012, the Solicitors Regulation Authority has expected the firms it supervises to disclose data for three tiers of employees: ‘solicitor partners’, ‘solicitors’ and ‘other staff’. As well as reporting ratios of employees by age, gender, ethnicity and disability, it includes ratios of employees who attended fee-paying schools and the percentage of those who were the first from their family to go to university. Some 9,383 firms provided information in 2014.
Alongside better diversity disclosure, the Gadhia review also highlighted the need for greater commitment at executive level to make progress on public diversity targets. This led to three recommendations in the final report, Empowering Productivity: Harnessing the Talents of Women in Financial Services:
- Companies should set internal diversity targets and publicly report on progress towards them;
- An executive committee member must be held accountable for tackling gender imbalances throughout the business;
- The bonuses of senior executives should be linked to progress towards diversity targets.
The report highlights how some leading financial services firms are stretching targets to drive change. For example, Barclays Bank has implemented a target for diversity within all candidate shortlists when recruiting for positions at the director and managing director levels. This ensures fair representation within talent pools and, in addition, all hiring panels must contain a gender mix of interviewers.
Quoted in the report, Lynne Atkin, HR director of Barclays Bank, said: “In some cases we’ve said, ‘If you’re not hiring the female candidate for a role you have to do a full business case of why that individual can’t be appointed’. We’ve had to just take to really tough measures in areas where it’s really tough to move the dial.” Meanwhile, Lloyds Banking Group has seen a significant improvement in gender imbalances since it appointed Andrew Bester as the executive sponsor for gender in 2014. Bester was deliberately drawn from a core business function – he is also group director and CEO for Commercial Banking at Lloyds Bank. He set up and chairs a diversity and inclusion operational committee made up of managing directors from each business area.
The committee meets each month to track progress against the firm’s gender strategy and action plan by analysing gender representation figures, engagement scores and trend data on hires, promotions and attrition of female colleagues across the business. Executive level commitment is also clearly having an impact at Lloyds Banking Group. The percentage of female external hires into senior management roles rose to 31% in 2015, compared with 17% in the previous year. The percentage of female promotions into senior management also rose from 26% to 33%.
There are clear indications that transparency can have apowerful impact on change. For example, female board representation was 24% at European capital market firms that disclosed the percentage of women on their board, and only 18% at firms that don’t make this explicit disclosure, according to New Financial.
This is likely to add to the political pressure for greater disclosure of diversity data and targets. Targets may not be as frightening as they first appear, according to Yasmine Chinwala of New Financial. If the capital markets industry were to set up a voluntary target of 33% female representation on boards it would take six years to achieve, she claims, based on the rate of change over the past year. Achieving 25% female representation on executive committees could take more than 10 years. But with a bit more momentum, these results could be achieved much sooner.