Equality Group in UK pushes for diversity

With emphasis on diversity, businesses are urged to give increasing priority to gender equality and ethnicity. With the importance of it, the chief executive of Equality Group in UK, Hephzi Pemberton, said that pay and bonuses should be linked to diversity and inclusive targets.

Pemberton said: “I think in an industry where people are incentivised financially to achieve targets and if leadership is taking it seriously and they want to see progress on it, they should be linking incentives to diversity and inclusive targets.”

Pemberton’s comments come amid broad consultation by regulators, over plans to boost the representation of under-served groups in the financial services sector. Using remuneration as an incentive to achieve diversity targets is among the options being considered.

It is interesting to note that an investment bank, State Street, aims to triple the number of black, Asian and other minority staff in senior roles by next year and has mandated lower bonuses for executives if they do not hit those targets. Furthermore, their recruiters will need to ensure that women and ethnic minority candidates are interviewed by a diverse panel.

The bank’s diversity head, Jess McNicholas said: “All of our leaders have to demonstrate at their annual appraisals what they have done to improve female representation and the number of colleagues from ethnic minority backgrounds.” Back in July last year, the Bank of England, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority published a joint discussion paper on their plans to monitor, track and improve diversity and inclusion in regulated companies. One of the policy options included linking executive pay to metrics on diversity and inclusion.

This, the regulators’ paper said would be possible with “granular diversity data that can be linked to a range of performance metrics, including pay and promotion, just like any other business objective.”

It would help drive accountability and incentivise progress, according to the regulators.

“I think it is effective but needs thought,” added Pemberton, who made the comments during an FT100 Most Influential Women in Finance event on 27 January. The London-based Equality Group is a consultancy that focuses on diversity and inclusion in the financial and technology sectors.

“It needs nuance around it. It is not one-size-fits-all, but linking whatever incentive systems are there and looking at how equality, diversity and inclusion can be embedded into that in an effective way,” she said. The FCA has said it will be publishing a consultation paper on diversity and inclusion in the second quarter of this year, inviting firms to respond with feedback.

Experts, however, have warned that there could be downfalls to that. Some diversity data, such as an employee’s sexual orientation or their ethnicity, has to be voluntarily disclosed by individuals. Employment lawyers Bradley Richardson and Laurie Ollivent of Linklaters wrote: “Without sound, robust figures, decisions may be made that are not truly representative or proportionate to the workforce.”

Pemberton also discussed the importance of data when measuring firms’ progress. “It does feel a little bit like we have got stuck on a few metrics like gender diversity on boards,” she said.

“When organisations do that, they think, ‘Oh, well, we’ve done it’, but it is not enough.” She added: “There is a risk that if you have a focus on too few metrics then that will become a bad target and people can game the system. There are a few examples where the same woman is on multiple boards and then organisations are claiming that all these companies have increased female board members. This then limits the expansion of the talent pool and means companies are not thinking about the pipeline of upcoming talent either.”