Its title might have slightly frivolous connotations for some people, but the Treasury’s Sexism in the City inquiry is examining a grave issue. It’s assessing the misogyny that women in the UK financial services sector are facing and the progress that employers have made in closing its gender pay gap since the first inquiry in 2018.
The investigation wants to know what, if anything, has improved for women working in London’s financial district over the past five years. Going by what City chiefs told it during the latest oral evidence session in November, the short answer is: not much.
The witnesses at that hearing included Sarah Boon, MD of corporate affairs and strategic policy at UK Finance; Yvonne Braun, director of policy at the Association of British Insurers; and Karen Northey, director of corporate affairs at the Investment Association. Each cited examples of initiatives designed to encourage women into the Square Mile, but there was little solid evidence of pay equality or of more women reaching the highest ranks of the sector and staying there.
More worryingly, other evidence submitted to the inquiry has alleged that sexist attitudes and behaviour – up to and including violence against women – remain rife in the industry.
“We know that some of the most awful abuses happen,” noted inquiry member Dame Angela Eagle MP at the November hearing. “There is a horrible amount of direct sexual assaults, sexual aggressions and, probably, criminal behaviour going on.”
In the same session, a clearly frustrated John Baron MP – a former merchant banker – told the assembled City executives: “You need to do more to get in there and sort this out. I am tired of all these surveys and initiatives when I’m not seeing much progress on the ground.”
What has changed since the original inquiry?
Matters have improved a little since the 2018 inquiry, but progress has been painfully slow. Take the Women in Finance Charter published by the Treasury in 2016, for instance. Its signatories pledged to improve gender diversity at their firms including at board level, but a review last year found that only a third of them had met their targets for boosting the number of women in senior management roles.
The pay gap has closed slightly since the first inquiry. As of 2022, women in the City were paid 24% less than men on average, compared with 31% less in 2018. And they received 57% less in bonuses than men, compared with 65% less in 2018.
Representation improved significantly in sectors such as insurance, but only 12.1% of fund managers in 2022 were women – a negligible increase on the previous year.
So why has change been so slow and why isn’t more being done to accelerate it?
The City is being called to account for itself on the public stage. The inquiry comes as a High Court lawsuit alleging sexual misconduct by high-profile hedge fund manager Crispin Odey looms. It also follows probes into systemic sexism in other prominent institutions and fields – the Royal Air Force, the Metropolitan Police Service and surgery – all of which have uncovered appalling behaviour.
These settings share certain characteristics. They are regulated professions whose practitioners have generally been highly regarded by society. They are historically the preserve of men and they’re all governed by behavioural codes that were established in a bygone age.
Is there a cultural problem at City firms?
Perhaps this is why the word “culture” was mentioned 49 times in November’s evidence session. Northey observed that “culture is one of the biggest problems in terms of making progress”, for instance, while Eagle derided “the bonus culture, the drinking culture, the clubby culture and the class culture of everyone coming from similar public schools”.
If the City’s long-standing culture is indeed fundamental to the sexism that pervades many of its institutions, how easy would it be to dismantle this and build an inclusive culture in its place?
Shifting the focus from individual to organisational misogyny
In September, Baroness Helena Morrissey, a high-profile financier and equality campaigner, urged the Financial Conduct Authority (FCA) to change the City’s culture by taking a harder line against the “bad apples” in the sector it regulates.
She pointed out that, even when complaints were upheld, “sanctions often err on the side of leniency, so bad apples are put back in the system and there is no deterrent for others”.
Morrissey’s call on the watchdog to show more bite could indeed help to remove the worst offenders if and when they’re exposed. But other observers argue that addressing sexism as an organisational problem, rather than blaming a few bad apples, could help to achieve more lasting and effective change.
Dr Lauren McCarthy is a senior lecturer in corporate social responsibility at City University of London. She recently co-wrote a study on misogyny in organisations with Dr Scott Taylor, professor of leadership and organisation studies at the University of Birmingham.
McCarthy observes that talk of bad apples implies that sexist behaviour is “rooted in specific individuals whom we need to get rid of – and then everything will be fine. But, if we think instead of misogyny as something that permeates an organisation and is embedded in some of the fundamental ways people think about women, it helps to explain how these things keep happening.”
Unpicking discrimination as an accepted part of business culture means “thinking about how things such as sexist or racist jokes become normalised to the extent that no one says anything when hideous things happen – or, when someone does speak out, they’re not listened to”, she explains.
Whenever power is abused in an organisation and one group of people is treated poorly, other disadvantaged groups tend to be discriminated against too. For instance, the inquiry into the Met after Sarah Everard’s murder by a serving police constable found the force not only institutionally sexist, but also racist and homophobic.
McCarthy and Taylor agree that examining all the discriminatory acts an institution such as the City tolerates is key to understanding how the perpetrators continue largely unchecked while their victims often stay silent to protect their careers and their health.
How can City firms get proactive about misogyny?
With such considerations in mind, what can progressive City leaders do to root out deep-seated discrimination in their sector?
Hannah Ford is a partner specialising in employment issues at law firm Stevens & Bolton. She believes that achieving true change “requires a sophisticated response. Just getting to a settlement agreement quickly to hush up a case is the wrong approach.”
The use of non-disclosure agreements to keep misconduct out of the public eye is common in financial services, but Ford argues that a progressive business would be transparent about its problems.
“It would say: ‘Yes, these do happen. When they do, we tackle them head on and investigate. We spend money, time and other resources on looking into them. And the full stop at the end isn’t a settlement agreement; it’s a report that our board sees on how we dealt with it.’ That’s the hallmark of a healthy, non-toxic organisation: no culture of silence,” she says.
Will new regulations help to achieve quality?
Tougher City rules could also help. The FCA has proposed an update to its guidance on non-financial misconduct in light of the Odey case. Despite the allegations against him, he was considered to have met the regulator’s “fit and proper” standard required of a leader of a financial services business. The FCA is seeking to clarify that serious personal misconduct is relevant when someone’s suitability to serve as a senior executive in the sector is being assessed.
Moreover, the Worker Protection (Amendment of Equality Act 2010) Act 2023 is set to come into force in October next year. It will impose a duty on employers to take “reasonable steps” to protect their staff from sexual harassment.
Looking further ahead, Taylor says he has “quite a lot of faith that the next government we have in Westminster will make misogyny a hate crime. The Scottish government has already started this work and I think it’s going to follow through on this quite quickly.”
Profit can incentivise diversity
The City exists to make money. Focusing on the clear link between profit and a healthily diverse workplace might be the biggest incentive for change. A research report published in November by BlackRock found that more gender-balanced companies have delivered a significantly higher return on annual assets than the average firm over the past decade.
“In other words, it is diversity that counts, rather than the dominance of women or men,” the report concluded.
If the City can remove its culture of silence and educate its leaders on the impact of factors such as gender, race and class on people’s experiences of the sector, the next inquiry might have better news to report. But, whatever happens, McCarthy argues that the challenge of shifting such a deep-seated misogynistic culture can no longer be used as an excuse to explain a lack of progress and absolve individuals of responsibility.
“What is culture if not people? We all make a culture,” she says. “To use it as a way of saying ‘it’s too much for us to deal with’ is wrong. Of course we can achieve change, but it’s not going to be easy.”