The bonuses of City executives should be linked to whether or not they meet targets for the number of senior women appointed at a firm, according to a government-backed report.
The review of women in finance, led by the chief executive of Virgin Money, Jayne-Anne Gadhia, also recommended on Wednesday that financial services firms should report publicly on their gender diversity. It said they should appoint an executive responsible for gender, diversity and inclusion.
The proposal to make part of the pay packages of a firm’s executive team dependent on its gender balance is one of Gadhia’s preliminary recommendations. She argues that businesses will increase productivity and improve results by encouraging more women into senior roles.
Gadhia said: “It should be a wake-up call to everyone in financial services that fewer women progress to senior levels than in any other industry in the UK. There are many views as to why that might be. Motherhood, remuneration, the ‘old boys’ network’ are all mentioned, but only scratch the surface of an issue that has been hidden for too long.”
Her comments come just days after a government-backed review set a new target for Britain’s biggest companies to ensure that at least a third of boardroom positions are held by women by the end of the decade. But the report from Mervyn Davies, who judged that the introduction of legally enforced quotas was not necessary, was criticised for not going far enough.
Many companies have been appointing women to non-executive director positions rather than executive roles.
A recent paper from Prof Colin P Green and Dr Swarnodeep Homroy at Lancaster University Management School found that appointing women to boards improves the financial performance of the average company by 5%. Researchers looked at data from 152 firms in Europe – 30% from the UK – between 2004 and 2013. It was only when they focused on women with key committee roles – audit, nomination and remuneration – that gains were seen.
The OECD has estimated that equalising the role of men and women in the labour market could boost GDP by 12% on average across OECD countries by 2030. But the World Economic Forum estimated in its 2014 global gender gap report that it would take until 2095 to achieve worldwide gender parity in the workplace.
Gadhia’s recommendations will be presented at a summit of financial services executives, hosted by the economic secretary to the Treasury, Harriett Baldwin, at 11 Downing Street, to discuss what can be done to increase the numbers of women in senior roles in the City.
The recommendations will also be discussed by a panel including the Goldman Sachs executive Michelle Pinggera, the HSBC executive Francesca McDonagh and Dame Amelia Fawcett, who chairs the Hedge Fund Standards Board. The panel will be chaired by Stephanie Flanders, the former BBC economics editor who is now the chief marketing strategist at JP Morgan Asset Management.
Baldwin said: “I know that there are a lot of brilliant, talented women out there whose skills would be an enormous asset to any firm. We should be making the most of that talent as all organisations work better when they benefit from a range of perspectives.”
Following consultation on the recommendations, Gadhia’s final report will be published ahead of next year’s budget.
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