Empowering Productivity - a charter for change

Jayne-Anne Gadhia’s report, Empowering Productivity led to the Treasury’s Women in Finance Charter. Although both the report and Charter are focussed on the Financial Services sector, its findings and recommendations will be of interest to all employers.


Interestingly, this report, whilst related to gender equality, was commissioned by HM Treasury as part of the Government’s 2015 Productivity Plan. As such, many of the arguments presented in the report relate to the economic, rather than social justice, benefits of equality.

It also notable that, whilst the report is confined to gender equality issues, the expectation is that progress on gender equality will act as a catalyst for other under-represented groups, with the recommendations in the report capable of being extended to diversity beyond gender.


The report found that there was a significant problem with female retention in the mid-tier of management, where women either do not progress or leave the financial services sector. Somewhat surprisingly, this applies to all women and not just those with childcare responsibilities.

The report cites a number of research studies where the business case of having women in senior management positions have clearly been shown, including a Credit Suisse report showing that the average return on equity of companies with at least one woman on the Board was four percentage points higher than those companies with no female Board representation and McKinsey’s research which shows that companies in the top quartile for gender diversity are 15% more likely to have financial returns above their national industry medians.

The report also presents the Government’s macroeconomic case for addressing gender equality in the Financial Services sector: better participation of women in the labour force is a crucial part of improving the UK’s long term economic performance.

Overarching recommendations

The report makes three overarching recommendations, with ten more detailed suggestions on how to address the issues raised, referred to as “Ten Positive Actions”. At this stage, the recommendations are purely voluntary, although there is a suggestion that should there be insufficient progress, the Government should look again at whether to legislate in this area.

The report also presents the Government’s macroeconomic case for addressing gender equality in the Financial Services sector: better participation of women in the labour force is a crucial part of improving the UK’s long term economic performance.


The first overarching recommendation, which overlaps with the gender pay gap reporting duty, is that firms should set their own internal gender equality targets, against which they publicly report progress. The report also suggests some relatively detailed reporting requirements, which include metrics on the gender split for each business unit in the UK and across the separate functions of the firm, as well as the percentage of the organisation working flexibly and the gender split of those employees, the percentage of maternity/paternity and shared parental leave employees returning to work and the gender split of those employees that left the organisation during the previous year.

Gender equality champion

The second overarching recommendation is that an executive should be accountable for improving gender diversity within their organisation. This is similar to the requirement to appoint a whistleblowers champion under recent FCA/PRA rules. This seeks to build on broader regulatory changes in the aftermath of the financial crisis, principally the increased focus on individual accountability, such as under the new Senior Manager Regime. Whilst the report is not prescriptive about who should do this role, it does suggest that there is a strong case for the responsibility sitting with someone in a business-facing role, rather than with HR. It is also clear from the report that organisations need to ensure that gender equality is seen as a genuine business issue that affects all parts of the business with suitable engagement by everyone required, rather than being simply a matter to be dealt with by HR.

Bonus impact

The final overarching recommendation, and the one likely to get most attention, is the suggestion that executive bonuses should be tied to achieving the organisation’s internal targets on gender equality. As with the recommendation on the gender equality champion, the report is not prescriptive in relation to how organisations should look to tie bonuses to gender diversity, including in relation to whom this recommendation will apply or how any adjustments should be calculated. This is likely to be the most controversial of all the recommendations.

Ten positive actions

The ten more detailed suggestions for improving gender equality are:

  1. Invest in Supportive People Managers
  2. Create the Right Culture
  3. Provide Technology which Supports Flexible Working
  4. Ensure there are Transparent Pay Structures
  5. Increase the Number of Female Role Models
  6. Implement Good Flexible Working Policies
  7. Support Working Parents (7&8)
  8. Support Working Parents (7&8)
  9. Offer Mentoring Schemes and "Active" Sponsorship 
  10. Provide Opportunities for Women to Gain Commercial Experience

One of the interesting observations from the report is the fact that firms need to make it easier for dads and partners to take time off by enhancing pay for Shared Parental Leave. This echoes the findings of the recent report by the Fawcett Society, “Parents, work and care: striking the balance.”

The Women in Finance Charter

Alongside the report, HM Treasury has published its voluntary “Women in Finance Charter”. It is clear from the report that HM Treasury expects most firms in scope to commit to the Charter. In July 2016, HM Treasury announced the first list of signatories (available here) and has subsequently provided high level guidance on what an organisation has to do in relation to the four key commitments in the Charter.

Which firms are in scope?

The Charter commitments are aimed at all financial services firms, as defined by the Financial Conduct Authority, with significant operations in the UK. It is primarily aimed at financial services firms with over 250 employees but HM Treasury welcomes firms of any size to sign up.

The four key commitments
  • An organisation signing up to Charter pledges to promote gender diversity by:
  • having one member of their senior executive team who is responsible and accountable for gender diversity and inclusion
  • setting internal targets for gender diversity in senior management
  • publishing progress annually against these targets in reports on its website, and
  • having an intention to ensure the pay of the senior executive team is linked to delivery against these internal targets on gender diversity.
Further guidance on what this means an organisation must do

The high level guidance on the charter sets out more detail:

Senior executive accountable for gender diversity
  • Firms must appoint a member of the senior executive team responsible and accountable for gender diversity and inclusion within three months of signing the Charter. There is no obligation to publish the name of this senior executive, but details must be provided in confidence to HM Treasury. Firms are welcome to publish these details if they choose.
Senior executive pay linked to delivery against gender diversity targets
  • Given the diversity of the sector, firms have discretion on how executive pay is linked to delivery. It is for firms to determine which employees are in scope and the proportion of bonuses affected.
  • Firms that do not operate bonus schemes are still welcome to become signatories, but would need to explain their position on variable pay to HM Treasury.
  • Firms do not have to publish details of how senior executive pay is linked to delivery against gender diversity targets, but must submit a short statement in confidence to HM Treasury to explain this link. Firms are welcome to publish these details if they choose.
Internal targets for gender diversity
  • Firms should set their own internal targets for gender diversity in senior management. This should ideally be a package of targets designed to improve gender diversity at the senior levels of your organisation. Given the diversity of firms in the sector, organisations have discretion on the detail of these targets and any overarching narrative explaining the rationale for these targets and plans to achieve them. However HM Treasury would expect to see at least one numerical target to address improving gender diversity in senior management.
  • Many firms have committed to improving gender diversity at the most senior levels. HM Treasury encourages firms to also set targets for a range of activities such as flexible working, recruitment, promotion or retention.
  • Internal targets can be set on an annual basis or up to five years. Longer term targets may be set, but this would need to be discussed with HM Treasury.
Reporting gender diversity targets
  • Firms should report their internal targets for gender diversity to HM Treasury within three months of signing the Charter.
  • These targets must be published on a webpage on the firm’s website which includes the HM Treasury Women in Finance Charter Mark. Firms must provide a link to this webpage which will be published on the gov.uk website alongside the list of current signatories. The webpage should be easily navigable where the targets are clear and easy to find (eg not buried in a large document).
  • Alongside the targets themselves, the webpage should also include some narrative text which explains why the firm has chosen these targets and how they can help improve gender diversity in senior management. When publishing progress annually against these targets, this narrative should also explain why the firm has or has not met their targets.
  • Firms have 12 months from the date they set their gender diversity targets to report progress against these targets to HM Treasury. This progress should be published alongside the targets on the firm’s webpage. Reporting progress against these targets will then be on an annual basis.
Women in Finance Charter annual review
  • HM Treasury will publish an annual review on how the sector is performing against the Charter commitments, in partnership with the think tank New Financial. The review will assess how signatory firms have progressed in delivering against their gender diversity targets.
  • The review will comprise a report which evaluates the extent to which firms have met their Charter commitments, identifying areas for improvement and case study examples of best practice across a variety of financial services firms. How the data is aggregated and presented in the annual review will depend on the information provided by firms when they report their progress to HM Treasury.
  • The first annual review will be published in December 2017. It will cover the progress of the first cohort of 72 signatories announced on 11 July, who will have published annual progress against their targets by 30 September 2017. It may also include later signatories that have also already set their targets by September 2017.
  • Firms that sign the Charter after 11 July will be primarily featured in the second annual review in 2018.

What should you be doing now?

Organisations should be considering whether they are currently in a position to commit to the pledges set out therein. We can expect that, if in 12 months there are large sections of the Financial Services sector that have not committed to the Charter, that HM Treasury will reconsider whether a more prescriptive approach is required.

Once committed to the Charter, organisations will need to consider how their existing policies and processes support the three overarching recommendations and what further work they would need to do in order to satisfy these, in particular in relation to the reporting requirements.

Organisations who both fall into proportionality level three under the existing PRA and FCA Codes and have less than 250 employees in Great Britain will be exempted from the Charter, however, they may wish to consider whether there is merit in voluntarily adopting the recommendations from the report.

Emily Cox, co-author of the Gadhia Report, joined us for a breakfast briefing on Friday 27 May and discussed:

  • the key recommendations in the report, and
  • Virgin Money's own work and commitments undertaken as a result of having been the leaders of the research.

Key messages from the breakfast briefing are available here.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.