Non-disclosure agreements (NDAs) that have been “misused” to “cover up” sexual harassment in the Square Mile should be banned, MPs have urged, in a damning set of findings on sexism in the financial services industry.
The Treasury watchdog called for urgent government action to root out sexual harassment, misogyny and gender imbalance across the sector, criticising slow industry-led efforts.
In a report unveiled on International Women’s Day, the Treasury Committee recommended legislation on NDAs, more protection for whistleblowers and greater reporting on the gender pay gap.
The committee’s report marks the culmination of its Sexism in the City inquiry, which it launched last July to evaluate progress made on barriers faced by women in financial services since its previous investigation in 2018.
MPs said there had been “incremental improvements” in female representation and the gender pay gap over the last six years but that the pace of change was “too slow and patchy”.
They noted that among signatories to the Treasury’s Women in Finance Charter, the average proportion of women in senior management roles was 35 per cent in 2022, up from 27 per cent in 2018.
Meanwhile, the figures vary significantly by sector, with just 12 per cent of named UK fund managers being women.
“The UK’s financial services sector is the crown jewel of this country’s economy – admired by the international community and always takes pride in being ahead of the curve,” said Conservative MP and committee chair Harriett Baldwin.
“This well-paid sector will only be able to maintain its competitive advantage if it is able to draw on the widest possible pool of talent. That’s why it’s so frustrating that efforts to tackle sexism in the City are moving at a snail’s pace.”
The committee recommended the government ban employers from asking for salary history and mandate they include salary bands on job advertisements.
Eleanor Rowswell, a partner at law firm Farrer & Co, told City A.M. that asking for salary history risked “perpetuating historic pay gaps and particularly discriminates against women, ethnic minority groups, and people with disabilities”.
She added: “Anecdotally, we still hear from women in financial firms of all sizes who consider that barriers to progression remain and that it can be harder for women to be recognised.”
MPs also recommended legislation for stronger protections for whistleblowers in sexual harassment cases after hearing from victims that perpetrators had “impunity”, helped by NDAs and HR teams that prioritised the business’ reputation over employees’ wellbeing.
The committee called for “a legislative ban on the use of NDAs in harassment cases”.
The Financial Conduct Authority (FCA) confirmed in January that it was launching a probe into how City firms deal with reports of workplace sexual harassment and bullying, including the use of NDAs.
While MPs welcomed regulators trying to “strengthen their regimes”, they urged them to drop requirements for firms to report data on misconduct incidents and set diversity targets due to cost and concern they could become a “tick-box exercise”.
The committee said it wanted to see more firms providing gender pay gap data to the government, as many smaller firms had “some of the worst cultures and levels of diversity”.
Currently, only financial services companies with more than 250 employees are required to provide the government an annual “snapshot” of their gender pay gap data. The committee called for this threshold to be lowered to 50 or more employees.
Baldwin said: “Firms must take responsibility for improving their culture. There have been several high-profile cases which show the existential risk to firms who don’t tackle sexual misconduct. We also know that more diverse organisations perform better, so inaction is not only immoral but bad for growth and business.
“Regulators and the government also have a role to play but they need to think carefully about what will deliver the best outcomes and avoid introducing tick-box exercises.”
An FCA spokesperson said it welcomed the committee’s feedback, adding that “our starting point was that what gets measured gets done, and transparent, comparable data would benefit firms, employees and the wider economy”.
They added that the FCA would “consider the committee’s recommendations on whistleblowing and the use of non-disclosure agreements, building on our existing work”.
The committee also recommended that the Women in Finance Charter should be extended to encourage more firms to link executive pay to performance on diversity and inclusion.
Professor Geeta Nargund, chair of executive advisory business The Pipeline, told City A.M.: “Appointing and promoting women is a crucial part of the equation, although it will not work unless firms root out toxic practices and create cultures which are supportive for all employees.”
Nargund, who is lead consultant for reproductive medicine at St George’s Hospital in London, also called on firms to “bridge the gender health gap at work” by recognising the impact of women’s health issues and introducing training.
Shadow City minister Tulip Siddiq said: “Women in financial services are being held back by an unacceptable sexist culture.
“The UK can’t unleash the full potential of the City while neglecting the talents of half the workforce. Labour will back women to smash the glass ceiling.”
She added that a Labour government would “tackle sexual harassment”, support women founding and scaling businesses and take action on “pernicious gender pay gaps”.