Natasha Adom, Senior lawyer, at GQ|Littler, the specialist employment firm, says that yessterday’s proposals from the FCA, PRA and Bank of England that financial services firms may be required to engage in much more detailed monitoring and reporting of diversity & inclusion could be ground breaking if they go ahead.
One of the proposals is that there could be a new requirement to regularly report on the demographic and socio-economic diversity of the board and broader workforce. This could potentially include ethnicity data and information about other protected characteristics (including religion or belief, disability and sexual orientation). There could also be a requirement to make that data publicly available.
As well as this, there is also a proposal to link progress on diversity and inclusion to remuneration.
Natasha Adom comments: “The challenge for regulators is to deliver a diversity and inclusion policy that has teeth. Many of the policies they’ve laid out are very progressive as the feeling is that while there has been progress in certain areas, that rate of progress is not fast enough.”
“Additional public reporting on the ethnic and social background of staff could help drive real change but it is not straightforward for employers and there are lots of complexities.”
“One of the big problems for businesses will be in the collection of this information. The FCA acknowledges that, even aside from data protection issues, this will be challenging and will take time along with new systems and processes. Individuals can (naturally) be reticent about providing personal information and this reticence increases the more information that is requested. Thankfully, there will be a pilot project to gather data on diversity within workforces and further consultation before any mandatory changes are made.”
“There is likely to be a lot of debate over the size of business that will have to report and whether smaller but still influential businesses, should be excluded from the reporting burden.
“The FCA is also considering whether adverse conduct on diversity and inclusion should expressly affect whether an individual is deemed to be “fit and proper”. Failing a fit and proper test can exclude them from a position of responsibility within financial services. If that sanction were used it would make individuals sit up and notice, but as the FCA has acknowledged, employers would need clear guidance on how that would work.”