Fresh data released by the FCA shows suggests the world of finance is still looking pretty male dominated. However, this is more than just an issue of equality, it could also be one of regulation.

The report in general makes for sober reading. Despite a lot of positive noise, senior jobs in finance are as male now as they were 15 years ago. The proportion of women in approved persons roles in the financial sector is 17% which is more or less the same as in 2005.

The picture is far from uniform. Smaller firms, it found, were less likely to have women in top roles than larger organisations. Major firms have seen a significant rise in the number of women in top jobs. Back in 2005 these firms were markedly less gender diverse than the industry average, but in 2019 they appear slightly above the industry average.

The conversation around gender diversity is also changing. Slowly but surely firms are beginning to realise that greater diversity is a benefit to the business rather than an ethical consideration.

Even so, this rise comes from a pretty low base and suggests that all the rhetoric surrounding diversity has not had the impact many might have expected.

A regulatory issue

Diversity is a regulatory issue for firms. Back in 2018 Christopher Woolard, Chief Executive of the FCA, pointed out that a firm’s approach to diversity and inclusion reveals a lot about their culture. Further more, he said, “the way firms handle non-financial misconduct, including allegations of sexual misconduct, is potentially relevant to our assessment of that firm, in the same way that their handling of insider dealing, market manipulation or any other misconduct is.”

In other words, the FCA believes a lack of gender diversity could be an indicator towards poor corporate behaviour.

Investors share this attitude with a move towards gender lens investment which examines a firm’s potential exposure to gender risk. A less diverse firm, one might assume, would be more likely to suffer from poor culture and may be open to a number of regulatory and PR issues which could impact financial return.

How firms should act

The lesson is the diversity is easy to talk about, but not quite as simple to achieve. However, some firms have managed it better than others. For those who have not, the message is clear: they should see this as a regulatory issue rather than just one of morality. Regulators see gender diversity as an important part of establishing the kind of positive culture they have been looking for.

So what can firms do?

The first is to be transparent about how you are performing on diversity. It should be a part of reports as much as other financial data.

The second is to make a clear commitment such as by joining the Treasuries Women in Finance initiative. The FCA’s report demonstrated that those firms which had done so were above the curve in terms of how many women make it into their top teams.

Thirdly it’s a case of education. The world of finance still suffers from a male dominated reputation, headlines such as the President’s Club still give the perception of an environment which is hostile to women. Changing this environment will encourage more women to choose finance and make their way up hierarchies.

There has already been plenty of reports showing the business case for diversity, but what’s becoming clear is that it’s also an issue of compliance. Having more women in top teams is not just about fairness, or about business performance; it’s also about reducing regulatory risk.