The topic of gender diversity in financial services continues to be a hot topic, with plenty of differences of opinion in how this should be tackled, such as the introduction of official quotas.

Some wonder whether gender diversity should even be a hot topic with everything else going on in the industry and the economy at large.

The Women in Finance Charter was one of the more recent attempts to tackle gender diversity directly, launching earlier this year and with at least 72 firms signed up to the commitments in the charter.

Signing up to this charter is voluntary and amounts to a commitment by HM Treasury and any firm signing up to it to work together and specifically in relation to the four pledges contained in the charter.

The aims of the charter are laudable but will it actually drive change in financial services?

On the positive side, for those firms signing up to the charter, they will need to publish the targets that they set in relation to gender diversity in senior management and publish their progress annually against it.

This is a pretty easy pledge to monitor and the negative press associated with failing to meet published targets will undoubtedly help to serve as a deterrent to those firms thinking they can sign up to this as a nice bit of PR without actually having to do anything.

Designating one member of the senior executive team to be responsible and accountable may also help to turn these pledges into tangible actions by avoiding having this fall into the pot of “everyone’s accountable so no one’s accountable”, particularly if the name of that senior executive is included with the publication of the progress against targets. No one enjoys seeing their failure become public.

Another positive aspect of the pledge is the intention to ensure that the pay of senior executives is linked to delivery against these internal targets. This should, one would think, have the impact of causing leaders to take tangible action to avoid their compensation packages adversely impacted should they fail to meet the pledges of the charter they have signed up to.

The biggest challenge of course, with all of this is that it is (a) voluntary and (b) will only be effective if it actually drives change in the industry.

Motivational factors

Given that these pledges are, in effect, promises, for those firms that sign up to truly be held accountable for following through, it feels like there will need to be a sizeable stick in the form of negative publicity to ensure that any commitments do not simply get forgotten or slide into the background as soon as bigger priorities show up.

It is worth remembering in this context, that the financial services sector as a whole does not exactly have a great track record in delivery on promises. Especially when those promises are not backed by financial sanctions and do not directly drive profit or revenue.

The last pledge will be particularly difficult to assess and arguably, it is the most likely to succeed, given it is likely to be a big motivating factor for those at the top level of these firms.

The pledge itself also only references “intention” to have pay “linked” to delivery against targets which waters down the commitment that firms are being asked to sign up.

How realistic is it that a failure to meet these targets will demonstrably impact on pay for the senior executive team? Would a financial services firm, in an industry where high compensation pay is deemed necessary to retain good people, risk losing any of its senior executive team by following through on this pledge when targets are not met?

Given what we have seen to date on pay and in the context of issues in certain parts of the financial services sector, it is hard to see how this will actually play out in reality in a way that this clear link can be seen both when targets are met and exceeded and when they are not.

It also of course, depends on how ambitious, or not, those targets are – easy targets, easily met, are not necessarily indicators of success in building a balanced and fair industry.

Ultimately, I would hope that in meeting this pledge, firms do not seek to create something artificial without addressing the underlying reasons within their particular firm as to why there is not more senior female representation in the executive pipeline and mid-tier level.

The imbalance has not been created and survived without good reason – quite often due to the culture, working environment and often compounded by a variety of other factors in existence (a topic for another day).

If firms do not look long and hard at why their gender imbalance has survived for so long, they will fail to tackle the underlying cause within their firm. And even if women have many of these barriers to rising within the firm removed, they may simply not want to.

About the author

Emma Hagan is the interim head of Enterprise-Wide Risk Management at Silicon Valley Bank Financial Group.