Major UK investors have written to the Financial Conduct Authority (FCA) to urge the regulator to act on racial equality by introducing mandatory ethnicity pay gap reporting for financial institutions.
In response to the FCA’s consultation on improving diversity and inclusion in the financial sector, members of ShareAction’s Good Work coalition – including NEST, Brunel Pension Fund and Church of England Pensions Board – argued transparently reporting racial pay disparities would catalyse further action to create the more equitable workplaces that shareholders and employees are demanding.
“Our response is in support of ShareAction’s work to advance racial equity in the UK workforce and ethnicity pay gap reporting,” the letter states.
“One of the key goals at ShareAction is for the investment system to support good workforce practices such as living wages, dependable contracts, and diversity, equity and inclusion. Another goal is to have a diverse and inclusive investment system that reflects the society it serves. Yet fewer than one in 10 management roles within the financial sector were held by Black, Asian or other ethnic minority staff.”
An ethnicity pay gap shows the difference in average and bonus pay between ethnic minority and White colleagues across an organisation. According to ShareAction research, which involved interviews with 17 FTSE 100 financial sector companies, reporting of ethnicity pay gaps often became the first step in bringing transparency and action.
The letter goes on to conclude that an ethnicity pay gap report is “merely a disclosure; it’s not prescribing how companies act on DEI issues”. Companies would still be free to come up with their own solutions by publishing their own narrative and action plan to complement the disclosure of their ethnicity pay gap.
“We are pleased to see the FCA taking action to improve diversity and inclusion in the financial sector. This is not just about fair pay, it is also about ensuring that our financial institutions adequately reflect the British society they are supposed to serve,” said Kohinoor Choudhury, senior campaigns officer at ShareAction.
“The FCA should heed investors’ call for ethnicity pay gap reporting to be mandatory, as a crucial first step to raising workforce standards across the sector.”
Despite a commitment made in 2018 to mandate ethnicity pay gap reporting, earlier this year the government rowed back, saying it would prefer a voluntary code. However, there is significant support across the business community for clarity and statutory guidance. Research by Baroness McGregor-Smith indicated improved racial equality could boost the UK economy by £24bn per annum, equivalent to 1.3% of GDP.
