Is 40% The Magic Number?

This month the Financial Conduct Authority (FCA) has come out with fists high, insisting listed companies should have at least 40% women on their boards. More than that: at least one of the senior board positions (Chair, Chief Executive Officer, Chief Financial Officer or senior independent director) should be female.

It is a landmark moment for women – and for diversity in the UK. This month the Financial Conduct Authority (FCA) has come out with fists high, insisting listed companies should have at least 40% women on their boards. More than that: at least one of the senior board positions (Chair, Chief Executive Officer, Chief Financial Officer or senior independent director) should be female (including those self-identifying as a woman).

WIBF is of course delighted, but thinks the FCA could have gone further. In her ‘day’ job at The Wisdom Council, WIBF president Anna Lane does a lot of work in the product governance arena. “I am a firm believer that diversity and inclusion are regulatory issues,” she says. “They are a very strong indicator of culture, governance and competitiveness and key components of ESG.”

The FCA has stopped short of actual mandatory quotas, but is asking firms to either comply or provide a good reason why not. A recent report, Slow Progress, by New Financial LLP highlights the continuing large pay gaps across financial services sectors compared to other UK industries. The New Financial think tank is H.M Treasury’s data partner, monitoring the data from the 400+ firms who are signatories of the Women In Finance Charter.

The principal reason is still the same: the very small number of women in more senior (and thus higher paid) roles. Regardless of where you work, you may like to know that investment banks and wealth managers are the major outliers, with gaps of more than 35%. In some sectors, such as consumer finance, diversified financials and wealth management (again), the pay gap is virtually unchanged since reporting began: a mere one percentage point improvement over three years.

After the FCA announcement, listed companies must disclose a standardised numerical table on the diversity of their board and executive management – by both gender and ethnicity – in their annual financial reports.

“Financial services companies need to reflect the society they serve,” adds Anna. “Over 80% of pension savers and investors think every company should aim to be as environmentally and socially responsible as they can be.”

According to the Better Business Act (BBA), 76% of consumers want businesses to be made legally responsible for their impact. The BBA is a coalition of businesses campaigning to change UK law, so that every company in the UK aligns its interests to environmental needs and to wider society.

You can read the full Slow Progress report here.