Sexism In The City – Employee Rights/ Labour Relations

#MeToo is still moving across the pond. On March 8, 2024, the
House of Commons Treasury Committee published a report entitled
“Sexism in the City” (referenced as “Report” in
this article), which found that the financial-services sector had
made little progress in removing the systemic barriers faced by
women in the workplace or the prevalence of sexual harassment. The
Report has called on the government, regulators and financial firms
to confront the issues contributing to gender inequality. It came
less than a month after the Financial Conduct Authority (FCA) sent
a series of information requests to insurance companies related to
sexual harassment and other non-financial misconduct.

The Treasury Committee’s Report and the FCA’s requests
are likely precursors to legislation, enforcement and more
stringent supervision. Financial -services
companies—including both those based in the United Kingdom
and those in the United States with a significant UK
presence—should take note of these developments and assess
whether enhancements to their policies and practices are
warranted.

Background and key findings

Five years ago, the Treasury Committee launched an inquiry into
women in finance. In 2018, the Committee issued a report
identifying a range of barriers faced by women in financial
services, including sexual harassment, bullying and pregnancy
discrimination, while proposing recommendations to mitigate those
barriers. To determine whether progress has been made, the
Committee launched its “Sexism in the City” inquiry in
July 2023. The inquiry revealed a disappointing lack of progress on
the various challenges experienced by women in financial services
and a lack of cultural change in the sector.

Although its Report acknowledged “incremental
improvements” for women working in financial services, such as
the proportion of women holding senior roles, the Treasury
Committee found that the following challenges persist:

• Gender pay gap: The financial-services sector
  has the largest gender pay gap of any of the UK economy’s
  sectors. As of 2022-23, the average pay gap within financial
  services was 23.7 percent, compared to 11.7 percent in all other
  industries. Progress since the start of gender pay-gap reporting in
  2017 has also been slow, with the gap reducing by only 1.7 percent
  over six years for financial-services firms. On this trajectory, it
  will take another 70 years for the gender pay gap to close in the
  sector.




• Prevalence of sexual harassment: Sexual
  harassment and bullying remain “shocking[ly]” prevalent,
  and firms continue to handle allegations of such behaviours poorly.
  Citing data collected by the not-for-profit organisation Speak Out
  Revolution, the advocacy group Can’t Buy My Silence informed
  the Treasury Committee that “45% of workers working in the
  financial services industry have encountered sexual harassment in
  the workplace”. Forms of sexual harassment ranged from
  inappropriate comments and being excluded from meetings to criminal
  harassment, assault and rape.




• Misuse of nondisclosure agreements: Misuse of
  nondisclosure agreements (NDAs) to attempt to “cover up”
  abuse allegations has been widespread. A roundtable conducted by
  the Treasury Committee revealed that NDAs had the
  damaging effect of silencing sexual-harassment victims while
  protecting the perpetrators and undermining incentives for firms to
  take action to prevent sexual harassment.




• Culture: Firms still treat diversity and
  inclusion as “tick box” exercises instead of core
  business priorities. Many described the cultures in
  financial-services firms as still “old boys’ clubs”.
  Several witnesses explained how existing initiatives on diversity
  and inclusion often aimed to change women to fit the culture better
  rather than change the culture to fit women better.

Recommendations

The Report has made numerous recommendations to address sexual
harassment, gender-based discrimination and bullying in the
financial-services sector—which companies would be wise to
heed now:

• Boards and senior leadership: The UK’s
  Prudential Regulation Authority (PRA) and FCA should ensure that
  firms’ boards and senior leadership take greater responsibility
  for improving diversity and inclusion instead of zeroing in on
  extensive data reporting and target setting.




• Firms’ policies: Firms need to embed
  zero-tolerance cultures towards harassment and bullying in their
  workplaces. They should ensure robust processes are in place to
  investigate harassment allegations, with the perpetrators of abuse
  rather than their victims suffering negative consequences.
  Additionally, the government and regulators should encourage all
  firms to equalise parental leave for men and women and be
  transparent about their maternity- and parental-leave policies,
  including when advertising available roles.




• Pay transparency: As noted by the previous
  Treasury Committee, the government should take action to encourage
  greater pay transparency, including by amending pay-gap reporting
  guidance so that partners’ remuneration is included.
  Additionally, the employer-size threshold for pay-gap reporting
  should be reduced from 250 to 50 employees—at least for firms
  in financial services, given the extent of the problem in this
  sector.




• NDAs: The government must tackle the misuse of
  NDAs and introduce legislation to ban their use in harassment
  cases. It must be clear that nothing in an NDA can prevent someone
  from reporting misconduct to the FCA or reporting a crime to the
  police.




• Enhancing flagship initiatives: Two government
  flagship initiatives—the gender pay-gap reporting
  regulations, introduced in 2017, and HM Treasury’s Women in
  Finance Charter, also launched in 2017—have successfully
  increased transparency and driven conversations but have not
  brought about the necessary extent of change. The Treasury
  Committee has recommended various enhancements to both initiatives,
  such as extending the focus of the Charter beyond the top level of
  senior management and requiring firms with pay gaps above a certain
  level to produce action plans on how they will reduce them.

Next steps

The Report has urged the government and regulators to implement
changes that will prevent and address sexual harassment,
gender-based discrimination and bullying in the financial-services
sector. The FCA has confirmed that it will
“prioritise proposals that tighten expectations on firms
to tackle misconduct such as bullying and sexual
harassment” this year and will consider the Treasury
Committee’s recommendations on whistleblowing and NDA use. The
FCA has also already issued two statutory requests for information
to wholesale banks and insurers requiring statistics regarding
instances of non-financial misconduct, which it will use to inform
its approach to supervision on this issue.

What should companies do now?

As a first step, firms should review their existing policies and
procedures to consider whether their whistleblowing procedures and
NDA use should be revised. Firms should also review their practices
to ensure they have robust processes for investigating workplace
misconduct and taking appropriate corrective action when
appropriate.

Whilst reviewing and enhancing policies and procedures is the
first step, effective implementation is critical. Firms should
routinely include non-financial misconduct as a component of their
training programmes, either as a stand-alone module or as part of
regular education on their codes of conduct and staff handbooks.
They should also ensure employees know how to report
misconduct.

Further, the Report has emphasised that boards and senior
leadership of firms must take greater responsibility for improving
diversity and inclusion. The board and management should be
regularly apprised of issues related to sexual harassment,
discrimination and retaliation in the workforce and demonstrate,
through both actions and words, that a firm’s policies will be
enforced and non-financial misconduct will not be tolerated.

This article was first published by International Banker on April 11,
2024.

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