City watchdogs have published a paper exploring whether they should link managers’ pay to their progress on diversity.
The Financial Conduct Authority, Prudential Regulation Authority and the Bank of England are consulting on plans to link progress on diversity to remuneration in a move they say “could be a key tool for driving accountability in firms and incentivise progress.”
In a discussion paper published this week, they say that increased diversity and inclusion will advance their statutory objectives by resulting in improved governance, decision-making and risk management within firms, a more innovative industry and products and services better suited to the diverse needs of consumers.
Sir Jon Cunliffe, Deputy Governor for Financial Stability at the Bank of England, said: “Diversity and inclusion is beneficial for financial stability. Groupthink and overconfidence are often at the root of financial crises. Enabling a diversity of thought and allowing for an array of perspectives to coexist supports a resilient, safe and effective financial system. The paper we have published invites a discussion on our thinking on how the industry, including Financial Market Infrastructure firms (FMIs), can develop its approach to diversity and inclusion, in line with our objective to ensure sound, robust financial markets.”
To assess progress the authorities are proposing collecting data from firms about their workforce. Before this there will be a one-off, pilot survey later this year which will help to develop the proposals set out in the discussion paper and test how firms’ can provide data with a view to considering regular reporting in the future.
Research shows the multiple benefits of diverse teams and ongoing skills shortages mean employers are having to broaden their talent pool. A survey by the Recruitment and Employment Confederation and KPMG shows the number of available workers fell in June at the fastest rate since 1997. Shortfalls are particularly acute in areas such as transport and logistics, hospitality, manufacturing and construction. The squeeze is said to be the result of the rush for businesses to reopen from lockdown, a sharp drop in overseas workers, due to Covid and Brexit, and 1.5m workers still on furlough.
Due to the shortage in transport which is leading to shortfalls in deliveries of food and collection of waste, the government is to temporary relax the legal limit on lorry drivers’ hours. Transport Secretary Grant Shapps said the temporary relaxation will kick in on July 12th so drivers and operators can make “slightly longer” journeys.