Sexism in the City will never end

At least not on the basis of the FCA’s report on its own Culture and misconduct survey. And we can expect other forms of poor behaviour - harassment, discrimination, bullying, racism and so on – to continue as well. Such behaviours may be exhibited by just a few, but the report confirms those few too often get away with it. In over a third of sexual harassment incidents (where the complaint was upheld), no action was taken. Looking at all types of incidences, disciplinary or ‘other’ actions were taken in just 43% of cases. In the remainder the FCA saw ‘a range of other?outcomes ?– either the cases were not investigated or unable to conclude, not upheld, upheld with no other action, or investigations were ongoing.’

The regulator’s survey extended across around 1,000 ‘wholesale’ financial firms – banks, insurers, brokers and intermediaries. The rate of poor reported behaviours increased by 40% over the two years to end 2023 – something the FCA thinks might be ‘an indication of a healthy speak up culture’. I do hope so – but have my doubts. Time and again, the Diversity Project has received confidential reports through its Safe Space mechanism, where someone says their working life (and their life in general) has become worse after reporting what happened, while the perpetrator carries on, perhaps with a rap on the knuckles in the form of a verbal warning. I’m convinced many people don’t report at all, discouraged by the fate of colleagues before them.

On the positives, most firms do investigate issues raised, and although most took ‘some’ form of action, a tiny proportion (as little as 1% in some sub-sectors) changed a perpetrator’s compensation. I find the numbers cited in the report around the use of NDAs or other settlement agreements quite incredible – just 7% of sexual harassment cases are said to involve a settlement agreement, and the figure is ZERO for cases related to the possession or use of illegal drugs. This is not corroborated by the experiences shared confidentially through the Diversity Project’s Safe Space for reporting issues – sometimes done by a third party to avoid someone breaking the terms of their settlement agreement. Even the FCA seems dubious about the numbers, declaring ‘We are engaging with industry to understand the context and rationale for this.’

There is so much that firms can do to address these issues. Nearly 40% of large firms say they have no formal governance procedure for non-financial misconduct. Too often, these issues are left to stretched management teams without the relevant experience or expertise needed to sort these problems out, rather than escalated to boards who might insist on a proper resolution. The Diversity Project will be working on this further with our members - firms of all sizes in the investment and savings industry - to help improve governance and alleviate the strain on both managers and those who either experience or witness poor behaviours.

But my biggest disappointment lies in the regulators’ own response. Firms really want more guidance. And time has dragged on with nothing forthcoming.

As the report spells out, problems need to be investigated properly and sensitively. Firms are understandably nervous about risking someone’s career by taking an overly heavy-handed approach to those who are deemed to have behaved badly, even after a robust and conclusive investigation - so they often err on the side of leniency. But that risks perpetrating bad behaviours: a woman I know was groped by a senior man at her firm when she was 28. She made a complaint, which was upheld, and ‘made to sign’ an NDA. A decade later she mentors a young woman who has told her she has been groped by the same guy. We are now jointly determined to tighten the legal framework around NDAs – but it’s been a DECADE!

?In July 2021, the FCA published Discussion Paper DP 21/2 ‘Diversity and inclusion in the financial sector – working together to drive change’. ‘Driving change’ takes far more urgency and commitment than we are seeing.? Over a year ago, the FCA and PRA published coordinated proposals ‘to boost diversity and inclusion to support healthy work cultures, reduce groupthink and unlock talent’. See our response here , which highlighted some of these issues and provided suggested solutions.

Yet today’s report – well over three years since the original discussion paper – invites the reader to click through to see what policy changes are expected. It reads: ‘We will not be publishing best practice or guidance to firms at this time. However, we are considering feedback to our consultation’ [that is over a year old]. ‘We will publish our finalised policy in due course.’ (What timeframe is that, exactly?)

In the meantime, the FCA seems to be handing over responsibility for sorting things out to firms themselves, ‘working with their trade associations’. I was Chair of the Investment Association for three years; much of the work involved consulting on and implementing regulations but a trade association is not the rule-setter. And if firms were going to get their own house in order, surely by now - after multiple scandals and discussion papers - that would already be evident?

Perhaps most disturbingly, the regulators cite their statutory objectives, apparently as a reason or excuse for not doing more. This last one shows it is all down to interpretation though. Those statutory objectives [with my commentary] are:

·????? Consumer protection [surely easier to accomplish if a firm’s culture is good and there is no sexual harassment, bullying, discrimination etc so the best talent can thrive?]

·????? Market integrity [ditto]

·????? Promotion of competition in the interests of consumers [ditto]

·????? Our secondary objective to facilitate the international competitiveness and growth of the UK economy in the medium to long term [once again, ditto]

Why no urgency? Why no explicit, ‘this is what we expect?’. I know some great people who work at the FCA in roles related to this. Please, just do it.

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