Reporting on International Women's Day 2024, the Treasury Committee's inquiry into Sexism in the City has identified a stubborn persistence of barriers to women's progression in the financial services sector, a disappointingly small reduction in the average gender pay gap (still the largest of any sector in the UK economy) and a shocking prevalence of sexual harassment and bullying, including very serious sexual misconduct.

The report calls on senior leadership and boards to drive cultural change and to embed a zero-tolerance culture towards harassment and bullying.  It also tasks Government and regulators with an urgent need to set a minimum standard of the elimination of sexual harassment across the sector. 

The report makes a number of recommendations on diversity and inclusion, barriers to women in the sector, pay and sexual harassment.

  • The Committee considered the impact of HM Treasury’s Women in Finance Charter, launched in 2016.   Although some minor progress has been made, the Committee has concluded that the focus of the Charter on female representation at just the senior management level is too narrow and they endorse a focus on supporting a pipeline of female talent.  To give that some teeth, the Committee advocates linking executive pay to diversity and inclusion, on a comply or explain basis.
  • Interestingly, the report recommends that the regulators abandon their plans for extensive data reporting and target setting on diversity and inclusion (reported in our blog here).  The Committee argues that this is an issue which the market itself should be able to solve without regulatory action, although that does seem at odds with other sections of the report which criticise the progress the sector has made without such intervention.
  • The report encourages firms to consider equalising their offer of parental leave for men and women, and to actively encourage more men to take it up, as well as advocating more transparency about their maternity and parental leave policies, by publishing them on websites.  There is also a call for firms to do more to recognise the impact of menopause and to establish policies and support for those affected.   Those recommendations are aligned with the direction of travel for many firms, although many will feel more could be done.
  • The continued prevalence of sexual harassment in these sector, which evidence appeared to demonstrate was higher than in other parts of the economy, was (quite rightly) a particular target of the Committee's fire.  The Committee argues that senior leadership needs to take ownership of the issues.  There are recommendations for training and to strengthen whistleblowing legislation to provide greater protection and support in sexual harassment cases.  The report argues that non-disclosure agreements, already the focus of much discussion in other forums, should be banned in sexual harassment cases.  Although the objectives are unarguable, the recommendations proposed show how difficult it can be for regulators or Parliament alone to drive cultural change. It will be interesting to see the impact of the new duty to prevent sexual harassment which comes into force in October this year and applies to all employers (not just those in the financial services sector). Will its introduction help to shift the dial? You can read more about the new duty and the steps you can take to prepare here.

The timing of the report comes at a fascinating time, with the regulators currently considering responses to their 2024 consultation paper on diversity and inclusion issues.  However, when giving evidence, Nikhil Rathi, CEO of the FCA, cautioned that the FCA was at the limit of its legal powers in respect of its ability to take action against individuals, and that it would be difficult to try to hold financial services to a higher standard than that set by Parliament for the whole economy in existing employment law.  We expect the FCA's response to its consultation paper later in 2024.

We know that the prevention of sexual harassment in the workplace is high on this government’s agenda and we can expect that focus to continue under any future Labour government. Indeed, in its Green Paper ‘A New Deal for Working People’, Labour has announced extensive plans to tackle discrimination and workplace inequalities more generally. Alongside tackling workplace harassment,  these plans include stronger family-friendly rights, and actions to close the gender, ethnicity and disability pay gaps. 

Against this backdrop and with a new generation of workers coming through who take well-being and diversity issues far more seriously than any generation before it, it makes sense for firms to give a real and detailed focus on the concrete steps they can take to drive cultural change.  If you would like to understand more about these issues and how to address them please feel free to contact me, or your usual Burges Salmon contact.