Senior managers at financial firms could see pay linked to their progress in making their workforces more diverse and inclusive, Britain’s financial regulators said in a discussion paper on Wednesday.
The Bank of England and Financial Conduct Authority said increased diversity and inclusion improved how companies were run and how decisions were taken, creating a more innovative industry that offers better products to consumers.
Bank of England Deputy Governor Sam Woods said more needed to be done to speed up progress in diversity and inclusion at financial firms he regulated.
“A lack of diversity of thought can lead to a lack of challenge to accepted views and ways of working, which risks compromising firms’ safety and soundness,” Woods said.
Studies showed progress was slow, with the proportion of women chief executives in the sector rising from 1.7 per cent in 2001 to just 9.7 per cent by the end of 2020, the paper said.
It also said there were signs ethnic diversity was declining, while most senior roles were held by people from higher socio-economic backgrounds.
“We believe that targets for representation can be a powerful way of driving change through commitment to shared goals,” the paper said.
Senior managers could have a specific responsibility for diversity and inclusion policies to ensure the right “tone from the top”.
“Linking progress on diversity and inclusion to remuneration could be a key tool for driving accountability in firms and incentivise progress,” the paper said.
Firms could measure progress not only by collecting workforce data on gender but also gathering information on nationality, educational attainment, age, disability, sexual orientation, family and carer status and whether employees were working full-time, part-time or flexible hours.
The regulators should consider how far such data could be publicly disclosed and whether adverse findings in relation to inclusion and diversity could mean a person was not “fit and proper” to hold a senior role.
The discussion paper is open to public consultation until Sept. 30 and a further consultation on detailed proposals will take place in the first quarter of 2022.