Part of the debate on how to improve corporate governance was around boosting diversity and challenge in the City. Witnesses to the Committee even suggested that greater female representation at senior levels would have made the banking crisis less likely.
Today’s report says "the lack of diversity on the boards of many, if not most, of our major financial institutions, may have heightened the problems of 'group-think' and made effective challenge and scrutiny of executive decisions less effective".
Moreover, "a sector which is failing to properly utilise the talents of over half the population clearly has substantial room for improvement", the report says.
This entails looking more widely at the industry structure, to ensure that able women who wish to progress are not held back, which is why the report also examines matters such as the long hours culture, the working environment and access to flexible working and family–friendly practices.
John McFall MP, Chair of the Committee said:
"Our work on the banking crisis highlighted the need for substantial improvement in corporate governance in the City. Diversity at the top is one way to challenge potentially dangerous 'group-think'.
"We are not saying that had women been in charge, the crisis wouldn’t have happened, but we are highlighting the fact that women are poorly represented in the financial sector, particularly at senior level.
"Moreover, it can only surely be in the interests of financial institutions themselves to try to boost female representation at senior level and thus try to embed diversity and challenge more deeply into the culture of banking."
The report notes that the challenge is not so much to change the legal framework, but to change practice and, where necessary, culture. The onus is on the City to demonstrate that it is committed to improving the representation of women at senior levels within the industry.
Whilst the Committee does not believe this should be achieved through the introduction of a quota system, it is clear that such pressure will intensify should the industry fail to act.
The report notes with disappointment that the CBI no longer appears to be working on a voluntary pledge to encourage its members to increase the number of women employed at senior levels.
However, the Committee was heartened to hear that the Minister for Trade, Investment and Small Business, had written to the Financial Reporting Council regarding diversity at senior level and today’s report urges the FRC to respond as soon as possible.
Mr McFall MP added:
"Not only are there disappointingly few women on boards, there is a significant pay gap in financial services. Most worryingly, there is evidence that the pay gap exists at entry level.
"Detailed figures are in the memorandum we received from the Chartered Management Institute. Our report urges the City to take matters into its own hands and improve gender diversity.
"However, we recommend that the Treasury Committee in the next Parliament monitors this: I am sure it will want to see evidence that this voluntary approach is yielding results. If it does not, then the pressure for compulsory measures is likely to grow."