Diversity Considerations for Financial Services
During recent months, the Black Lives Matter movement has triggered widespread commentary on the need to combat racial inequality and implement lasting cultural change within society and the workplace. Amongst employers, there appears to be a growing recognition of both the social and financial business case for building an inclusive workplace culture.
This imperative shift is starting to be embraced by the financial industry, with Moody’s recently describing Lloyds Banking Group’s programme to promote more black employees to senior roles as “credit positive”. In light of the potentially wide-ranging benefits of embedding creative diversity and inclusion initiatives into long term business plans, and increased pressure from investors, clients and the general public, many companies may be looking afresh at utilising the “positive action” provisions contained within the Equality Act 2010 (“EqA”).
In this article, Pooja Dasgupta, Associate in partnership and employment law at CM Murray, discusses what positive action is and how employers in the financial sector might use it to further their reinvigorated diversity aims.
Positive discrimination vs positive action
Positive action should not be confused with positive discrimination. Under the EqA, positive discrimination means treating a person more favourably than another because of a protected characteristic (race being one such characteristic). This is unlawful unless one of the statutory occupational requirements applies. In contrast, positive action (which is entirely voluntary, save in certain exceptions), if adopted correctly, may lawfully achieve greater participation of unrepresented groups who share a protected characteristic, generating a wider talent pool; leading to a broader range of ideas; and, ultimately, ensuring better and fairer decision making at senior level.
Positive action – key aspects
The EqA allows employers to take two main types of positive action, as follows:
- General positive action – where employers reasonably think that people with a particular protected characteristic are i) disadvantaged; ii) have different needs; or iii) are disproportionately represented, employers can take proportionate measures to enable or encourage those people to overcome that disadvantage, to meet their needs or to enable or encourage their increased participation. An example of positive action is to have aspirational objectives and targets. These are now being more widely used, including by EY, who have a target of 40% female Partners and 20% BAME Partners by 2025.
- Positive action in recruitment or promotion decisions – this provision allows employers to treat an applicant or employee who has a protected characteristic more favourably in connection with recruitment or promotion than someone who is “as qualified” for the role but who does not have the relevant protected characteristic. The application of this provision can be difficult in practice, as evidenced by a recent Employment Tribunal case, where the employer mistakenly deemed 127 candidates who had passed an assessment to be of “equal merit” when, in fact, data showed that the candidates who had passed ranged from weak to strong passes. Employers should adopt objective assessment criteria, considering overall ability, competence and professional experience, relevant formal or academic qualifications, and any other qualities required for the specific job.
Under the EqA, positive discrimination means treating a person more favourably than another because of a protected characteristic (race being one such characteristic).
Employers should take a case by case approach and avoid blanket policies of appointing, promoting or otherwise treating more favourably individuals with a protected characteristic. Action must be proportionate and based on thorough analysis of reliable information that indicates the scale of underrepresentation (of which there will be plenty, in the current climate); what other actions have been taken to address it; and any progress that has been made. Employers should prepare detailed action plans with specific outcomes and regular review periods to monitor the impact and proportionality of any ongoing positive action on the protected group and other groups.
- Think creatively about how to attract a diverse pool of talent – this may include encouraging those from particular groups to apply for roles, whether by implementing monitoring programmes; delivering training to minority students; or providing bursaries. With this aim in mind, the Premier League, English Football League and Professional Footballers’ Association have recently announced a new initiative, which will give up to six BAME coaches a 23-month work placement in an effort to increase the number of BAME players moving into full-time coaching roles. Employers should also take steps to provide mentoring programmes and networking opportunities to existing staff from disadvantaged groups; for example, AXA’s “WoMen@AXA” initiative, designed to foster the professional development of women.
- Remove any existing barriers in your recruitment process – employers should take the time to review the diversity of their internal or external recruitment teams and implement systems that reduce the opportunity for bias.
- Build greater awareness of racial inequality and the benefits of maintaining an inclusive workplace culture – employers should regularly deliver equality, diversity and inclusion training. Unconscious bias training will also be particularly important for those in decision making roles. Where possible, employers might consider developing an internal knowledge/resource sharing platform, so that staff can informally share information regarding diversity issues, encouraging an open discussion amongst individuals from different backgrounds. Employers should also consider how best to use their social media platforms to encourage meaningful discussion about these issues, rather than simply issuing “empty” PR statements for the sake of good publicity.
- Consider implementing voluntary ethnicity pay gap reporting – pending the UK government’s outcome being published in respect of its consultation on ethnicity pay reporting, companies should consider implementing voluntary ethnicity pay gap reporting; in the financial sector, this type of data will be increasingly important, with regard to investors analysing the progress made by companies in respect of inclusion.
- Finally, but most importantly, do not be afraid to take positive action – it is no longer acceptable to “go with the flow” and hope for the best in respect of diversity. The fear of exposure to potential legal claims, if you get positive action wrong, should no longer outweigh the need to drive lasting, meaningful change. Taking calculated risks, based on reliable and up to date information, will undoubtedly make organisations more attractive to applicants, investors and clients and, internally, immeasurably reshape workplace culture.