Questions have been raised following research indicating venture capital firms have been recruiting more women in junior and non-ownership roles to disguise a lack of gender diversity in senior and leadership roles.
Research by Ada Ventures found that while women comprise 38 per cent of employees within the industry as a whole, they hold only 30 per cent of executive positions. It also claimed that firms may be misusing job titles to conceal a lack of authority for women to make investment decisions, and to obscure the reality that only 17.7 per cent of women have significant ownership of management companies.
Gender pay gap information reporting regulations
The gender pay gap reporting regulations apply to large private and voluntary sector employers (defined as those with 250 or more employees). The regulations have been criticised for not containing any enforcement mechanism requiring companies to improve their pay gaps, or any sanctions for failing to comply with the reporting obligations or for publishing inaccurate or misleading reports.
The Equality and Human Rights Commission (EHRC) has powers to carry out investigations into ‘unlawful acts’ and can issue unlawful act notices. In 2023, the EHRC sent warning notices to 730 employers that had failed to meet the deadlines in March and April 2023. Of these, eight had still not reported their data in July 2023 and so were ‘named and shamed’ on the EHRC website.
FCA disclosure requirement
The Financial Conduct Authority (FCA) introduced measures to “improve transparency on the diversity of company boards and their executive management for investors and other market participants”.
In-scope companies must include a statement in their annual reports setting out whether they have met targets on a ‘comply or explain’ basis including having at least 40 per cent female representation at board level, and at least one senior board member being a woman. The FCA will periodically review annual reports to determine whether listed companies are meeting the requirements. If not, it may request corrective action. It will also assess how its regulatory intervention has resulted in any material improvements in the meeting of targets.
Bloomberg gender reporting framework
This voluntary framework seeks to promote transparency and accountability. Companies can respond to a set of standardised questions and metrics to report on their gender-related policies, practices and outcomes. Reporting includes key issues such as female leadership, pay gaps, family leave policies and initiatives to promote gender equality. The disclosures enable investors and other stakeholders who have access to the results to make informed assessments of an organisation submitting to the framework.
FCA/PRA consultation on diversity and inclusion
In September, the FCA and PRA launched a consultation on a new regulatory framework on diversity and inclusion. The proposals would require large firms to do the following:
Diversity and inclusion strategy: setting out objectives; a plan for identifying and managing obstacles; and making staff aware of the strategy.
Targets: required to address underrepresentation of demographic characteristics.
Data reporting and disclosure: certain demographic characteristics will be mandatory. Reporting other characteristics, such as socioeconomic background and gender identity, will be voluntary.
Risk and governance: diversity and inclusion must be built into governance structures and considered as non-financial risk.
Businesses need to be careful about messaging on diversity and inclusion practices as regards tackling gender disparity in leadership positions. Notably, the landscape is evolving and employers that are unable to demonstrate that they take such issues seriously may face legal, regulatory and reputational risk in a market that is increasingly placing importance on addressing gender equality issues.
Daniel Stander is an employment lawyer at Vedder Price