British Bankers Could Have Bonuses Linked to Diversity Goals

Bonuses for senior British financiers could be tied to diversity goals and boards could face extra membership targets under proposals from regulators Wednesday.

Senior staff could also become directly responsible for inclusion at their companies, according to a report from the Financial Conduct Authority and the Prudential Regulation Authority.

“While some progress has been made to improve diversity and inclusion in parts of the financial services sector over the last decade, the discussion is still in its early stages, and more needs to be done to speed up progress,” said Sam Woods, chief executive officer of the PRA. “A lack of diversity of thought can lead to a lack of challenge to accepted views and ways of working, which risks compromising firms’ safety and soundness.”

A consultation will run on the ideas until Sept. 30. It’s the latest attempt from the regulators to encourage a broader range of people to join and lead the industry. While large firms have already agreed to targets on promoting women at senior levels, the proposed goals would address more underrepresented groups as well as smaller companies and more junior roles.

Claire Tunley, chief executive officer at the Financial Services Skills Commission, said “further action needs to be taken to mobilize the breadth of the change required.” The commission echoed the regulator’s comments on needing more data to measure inclusion within companies.

Just 6.8% of FTSE 350 board members are identified as directors of color, and the regulators cited research showing representation for ethnic minorities could be going into reverse. A report published in June by Women on Boards U.K. also showed about 8% of FTSE 350 companies had all-male executive teams at the end of last year -- rising to more than half among the smaller FTSE All-Share index members.

The regulators said they did not want to set prescriptive rules on tying bonuses to diversity measures, but highlighted that some companies already factor it into CEO pay and the overall bonus pool.

Authorities could also take the diversity of a company into account when dealing with cases relating to “non-financial misconduct,” the report said.

Nikhil Rathi, chief executive officer of the FCA, warned in March that firms looking to join the London stock market could potentially face quotas on the diversity of their boardrooms.

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