Mandatory gender pay gap reporting for UK companies comes into force in April 2017. This is an issue Boards cannot afford to ignore.
In building and developing public company Boards and leadership teams, Fidelio recognises diversity as a critical component of Board effectiveness. The new gender pay gap reporting legislation supports existing diversity initiatives, and will impact all UK corporates with at least 250 employees.
Fidelio was therefore delighted to welcome Ann Francke, CEO, Chartered Management Institute (CMI) to explore the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 on gender pay reporting and the implications for Boards. CMI has been reporting gender pay gap statistics to the UK Government for 40 years, and has made a critical policy contribution. Ann is therefore uniquely well placed to shed light on the topic.
- Based on a recent comprehensive survey of UK companies there are substantially more men than women at senior management and Director level; at junior management level women predominate. The average pay gap across all cohorts is 23% and is wider than it was 10 years ago. This is due to a combination of factors, primarily promotions and bonus disparity.
- CMI has identified a number of causes for the greater number of men at the senior ranks of business, which corporates can seek to address. This includes more men than women being promoted to ‘gateway roles’, the predominance of men in key functional areas such as finance, which typically lead to senior roles, and a cultural issue surrounding working hours.
- Ann shed light on the formal gender pay reporting requirements.
- Importantly, Ann highlighted the business case for diversity at both macroeconomic level, and within individual companies, citing research which highlights a 19% ROE premium for female CEOs and 18% for diverse management teams. In addition to this diverse teams are also linked with stronger culture, better performance and de-risked decision-making.
The Implications for Boards
Ann concluded the breakfast by setting out the implications of mandatory gender pay gap reporting for Boards, and suggesting next steps to ensure positive engagement with the new legislation:
- Don’t try to hide the problem: Many companies will have a gender pay gap. Board Members may see this as a prompt to rethink diversity initiatives
- Find the cause: This can also be an opportunity to locate the root of the cause within the company. Is it bonuses? Gateway roles? Unconscious bias around part-time workers?
- Create and communicate a plan: Having identified the problems, the Board should challenge the Executive Committee to ensure there is a plan in place to rectify the issue.
- Prepare early: There will be a reputational premium for early adopters, and Ann indicated that a number of companies are gearing up to report as early as April 2017.
- Build a strong pipeline: Developing a diverse pipeline of talent for senior roles is critical to closing the gender pay gap in the long term. Ann urged that companies ensure both diverse shortlists and diverse Hiring Committees when sourcing talent. Fidelio has demonstrated strong commitment to developing a pipeline of female CEOs and Chairs through the “A Seat at the Table” development programme with its focus on readiness for public company Boards.
In conclusion Ann praised the UK gender pay gap reporting policy as unique and advocated keeping the focus on the business case for diversity as far as possible. Improving diversity throughout the organisation, and closing the gap on gender pay will require a combination of policies and practices. This may include making sure the CEO and leadership team champion diversity, and setting voluntary targets for the pipeline and pay gap at all four quartiles of the pyramid.
Fidelio recognises the importance of closing the gender pay gap and is also aware of the challenges faced by specific sectors and industries. The intention to drive change and a strong narrative will be important in overcoming structural issues, as Fidelio has previously explored for example in the engineering sector. With reporting regulations coming into effect from April 2017 Boards cannot afford to leave this important topic on the back burner.
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Ann Francke, has been CEO of CMI, Chartered Management Institute, since 2012. (CMI has produced the gender pay gap statistics for the UK government.) Ann is a transformational leader with vision, pace and proven ability in increasing impact of management and leadership excellence.
Ann has authored ‘Financial Times Guide to Management’, holds advisory board positions at Grant Thornton International, Tongal a digital start up, Lancaster Management, Open University and Nottingham Trent Business Schools, and has been named in the top 100 women to watch in the 2015 Female FTSE Cranfield report.
Ann previously held Senior Executive positions at: Procter and Gamble, Mars, Boots, Yell and BSI. Ann has also been an important contributor to Fidelio’s acclaimed “A Seat at the Table” Programme for senior female executives and directors.
As a Board Development and Executive Search consultancy, has a clear focus on building effective public company Boards and leadership teams. We do this through Search, Development and Evaluation, underpinned by a deep understanding of what shareholders and stakeholders expect from the leadership team. Diversity is hardwired into every aspect of Fidelio’s offering. Based in London we work internationally.
For further information on how we can support your company through Search, Development or Evaluation, or of Fidelio’s “A Seat at the Table” Programme for senior female executives and directors please contact Gillian Karran-Cumberlege, or alternatively call + 44 (0) 20 7759 2200.