Executive pay to be linked to targets under City watchdog’s bid to boost diversity

EXECUTIVES of financial services firms could see their pay linked to diversity targets under plans set out by the Bank of England and City regulators.

The Bank, Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) are looking at ways to use their powers to boost diversity and inclusion in financial services, including the use of targets, regular reporting and linking pay to progress.

Sam Woods, Bank of England deputy governor for prudential regulation and chief executive of the PRA, admitted “more needs to be done” to speed up progress on increasing diversity throughout the sector.

He said: “While some progress has been made to improve diversity and inclusion in parts of the financial services sector over the last decade, the discussion is still in its early stages and more needs to be done to speed up progress.

“Regulators and industry need to work together to increase diversity at senior levels and ensure that the UK’s financial services firms are best equipped to serve the economy.

“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.”

In a discussion paper on increasing diversity, the regulators are proposing to make senior leaders directly accountable for diversity and inclusion in their firms, with a focus on data and disclosure to allow regulators to monitor progress.

It comes after recent data has suggested there is woeful representation of women and black, Asian and minority ethnic (BAME) groups in senior leadership roles across the sector.

The 2021 Women in Finance Charter Annual Review found under a third – 32% – of senior manager roles were held by women on average – edging up less than one percentage point year-on-year since 2017.

While gender balance progress has been made across the FTSE 100 thanks to the Hampton-Alexander Review, a recent report by Women on Boards UK found less than half of listed firms outside of the biggest 350 companies have met targets for women in the boardroom.