When Dianne Greyson, activist and founder of the Ethnicity Pay Gap campaign, read there was a £3.2bn pay gap for Black, Asian and ethnic minority workers, she knew something needed to change. It was 2018, and as the #MeToo movement gained momentum, Greyson began to sell #EthnicityPayGap t-shirts with one mission: to encourage organisations to close the gap and show evidence of that.
Six years on, progress unfortunately remains slow around the world. Research by the Office For National Statistics in the UK last November found that in 2022, Black, African, Caribbean or Black British employees earned less (£13.53) median gross hourly pay than White employees (£14.35). This figure has been consistent since 2012. Although the issue of mandatory pay gap reporting was debated in Parliament in 2021, it was voted down despite popular support.
See also: – Parker Review: Most FTSE 100 companies have ethnic representation – but private companies are lagging
However, the investment industry is beginning to address these shortcomings. Last September, the FCA released a consultation paper about a proposal to boost diversity and inclusion in financial services to support healthy work cultures, reduce groupthink and unlock talent. This included requirements on larger firms to develop a diversity and inclusion strategy, advising how to collect, report and disclose data and set targets to address under-representation.
A couple of months later in December, UK investors wrote to the FCA to act on racial equality by introducing mandatory reporting. The letter argued that reporting racial pay disparities would catalyse further action to create more equitable workplaces that shareholders and employees are demanding. Signed by members of the ShareAction Good Work coalition, the NGO also launched a ethnicity pay gap reporting toolkit last June. Leader of the campaign, Kohinoor Choudhury, revealed that many investors were keen to use the tool.
As a relatively new journalist on the PA Future team, I wanted to investigate further how asset managers were approaching ethnicity pay gaps and if any further action was being taken to support Greyson’s mission. Research by Baroness McGregor-Smith suggested that improved racial equality could boost the UK economy by £24bn per annum, equivalent to 1.3% of GDP. So, given the long-term financial benefits of reporting, I wondered why some asset management firms were being proactive, whilst others did not have anything to comment when I approached them.
Coming soon! Portfolio Adviser, PA Future and Reboot are embarking on an exciting partnership to help the investment management industry boost ethnicity diversity and inclusion. Watch out for the announcement in the coming months!
Data is the proof-point of positive action
When I spoke to the firms that choose to report, we discussed the intrinsic value of reporting. Mark McLane, head of diversity, inclusion and wellbeing at M&G Investments, said the organisation has been voluntarily reporting on the ethnicity pay gap since 2021 to improve data transparency. Overall, the firm have seen a 0.2% increase in Black, Asian and ethnic minority representation across its UK workforce.
McLane said: “Reporting on the ethnicity becomes a proof-point to show all of the internal strategies the firm has put in place to improve diversity and inclusion. It shows how strategies are having a positive effect, for example, by increasing ethnic representation in senior leadership. It also shines a light on how companies can improve and consider strategies to reduce the gap, specifically where the disparities exist and how to fix them”
This was echoed by Greyson, who said: “Data is the evidence for the results of your actions,” alongside Karan Peer, head of human and social capital research at GIST Impact, who reiterated: “You cannot manage what you cannot measure.”
The message is hammered home: the financial industry champions the value of data, yet still in parts falls short when it comes to diversity statistics. So, why have reporting rates remained so low? There are two apparent reasons; inadequate data and it not currently being mandatory to report on ethnicity pay gaps.
Tackling self-disclosure rates
The inadequate data raises the dilemma of low self-disclosure rates, where companies cannot collate enough data to produce valuable ethnicity pay gap reports. It remains optional to submit ethnicity data – and a lot of individuals remain choose not to do so. What this suggests, however, is that firms have a duty to encourage and educate their employees around self-disclosure and highlight the benefits.
I spoke to head of human resources at LGT Wealth Management, Joanna Shackleton, about how the firm’s HR approaches employee data collection, given that the firm has reported on the ethnicity pay gap since 2021. Shackleton said: “Trust is key when it comes to data collection.” She explained trust is gained when employees are told that their data will be used in a tangible and positive way to continue to move forward as an organisation. Companies must show that they are using the information for the benefit of the organisation, that is, to improve diversity and inclusion in the workplace.
McLane echoed this point, signalling that strengthening HR systems has improved the integrity of their ethnicity pay gap reports. “Accessibility is part of our HR system since 2019 and this includes the opportunity to include social mobility questions. When we announced that social mobility was part of self-identification, we encouraged colleagues to look at their personal profile, and how they want to be represented,” he said.
To provide an example of how companies hoping to collect data can approach employees, Greyson shared:
“As a Black woman, you come up to me and ask what my ethnicity is. The reason why we need to know is because we want to report on the ethnicity pay gap which will help improve diversity and inclusion in the workplace. Your data will help us improve the validity of our report and we need your information to be able to do that. Would you mind filling in this form and letting us know what your ethnicity is? What do you think my answer is going to be? It’s going to be yes.”
Greyson added: “You can get the data, just make an effort.”
Talent will be lost if the gap doesn’t close
A failure to report simultaneously fails to support the long-term growth of the company as firms will not know which areas they need to address. Figures show that companies with an ethnically diverse leadership invite a more diverse range of opinions and ideas, leading to better governance, effective decision-making and helps drive long-term value.
Greyson reiterated: “Companies must recognise that if they don’t report they’re going to lose talent. Research reveals that 88.9% said that they would look favourably at organisations that would report on the ethnicity pay gap. Potential employees are noticing and companies are going to lose out because of it.
“Do you want to appear as a caring organisation or one that is simply checking the boxes? Companies must be clear for what they stand for.”
Furthermore, research by the campaigning group, Reboot, revealed that out of 200 senior institutional investors and wealth managers, nearly two out of five (38%) would refuse to work with fund managers because of a lack of racial diversity in the manager’s workforce.
ShareAction’s Choudhury added there is evidence younger generations want to work in more diverse and inclusive companies. “If companies want to attract and retain staff then they do need to show that they’re doing this work – it’s in the company’s interests, which means it’s in the investors interest.”
Greyson added: “We must remember that these statistics are people. Hopefully that will make companies feel a little more deeper about why they should report on the ethnicity pay gap.”
