Speech by Sheldon Mills, Executive Director, Consumers and Competition, delivered at New Financial.
Speaker: Sheldon Mills, Executive Director, Consumers and Competition
Event: Accelerating Black Inclusion research launch, New Financial
Delivered: 22 April 2021
Note: this is the speech as drafted and may differ from the delivered version
- There is a lack of black people across senior roles in financial services, and there is a strong business case for improving diversity and inclusion at senior levels, with black inclusion being an important part of that.
- The racism that many black people face in the workplace is not overt, but subtle and insidious, and it adds obstacles for black people to succeed.
- Black inclusion is important to us as a regulator. We want firms to consider how they can accelerate black inclusion at all levels as part of their diversity and inclusion agendas. Data plays an important role in driving transparency and action.
- We have recognised our own challenges as an employer and are taking action as an employer to improve black, Asian and minority ethnic representation and inclusion.
This is an issue I care deeply about personally, but also as a regulator and an Executive leader.
As many of you will know, today is Stephen Lawrence Day, the anniversary marking his murder in 1993. It is day to acknowledge the part that we can play in creating an inclusive society. It’s a very powerful framing for the discussion on black inclusion that I want us to have today.
The lack of black people in senior roles is something we see across the financial services industry. Only 10 of 297 (3.4%) of chairs, chief executives or finance chiefs have ethnic minority backgrounds in FTSE100 firms. None of these are black, for the first time in six years.
Data helps to drive transparency and action, and we need more data on black inclusion, but it’s important that we also listen to the voices behind the numbers.
This report does exactly that, shedding light on the challenges and lived experiences of senior black people in financial services. People who in many respects have ‘made it’, but have had to fight so very hard to get to where they have, and are still subject to racism when they go into work.
It may not be overt racism that they face, it’s more subtle and insidious – whether that is individuals being surprised because black people speak a certain way, assuming they are the most junior team members or asking them to make the tea. Maybe it’s the black woman being told she is aggressive or confrontational, when the white woman is told she is confident and assertive, or the person turned down for the role because of a ‘lack of polish’ or they weren’t the right ‘fit’.
Let me be very clear, that is still racism. It has the direct effect of undermining black people, it makes us feel self-conscious and question whether we can bring our whole selves to work or if we have to moderate our behaviour to fit in. All things that impact how hard we have to work, and the hurdles we have to overcome to be successful.
I recognise many of the experiences that come through in the research from my own career. As a black man, I have experienced racism and been impacted by the lack of availability of opportunity and resulting outcomes that many black people face in the UK.
The importance of black inclusion
The murder of George Floyd sparked a movement that helped move the dial on a long overdue debate about racism.
As a result, we have seen much greater recognition over the past year of issues facing black colleagues in the financial services sector. We have also seen commitments to improve black inclusion in the workplace. This is positive, and it’s crucial that the momentum and commitments are turned into actions and meaningful change.
It’s clear that we need greater representation at all levels. We know for example that less than 1% of investment managers are black. This compares with 3% of the UK population and more than 13% of London. It raises questions about the future of the talent pipeline. And representation matters. According to research, the most ethnically diverse companies, for example, are 35% more likely to outperform the least diverse.
Black, Asian and minority ethnic adults are disproportionately represented among the growing number of vulnerable consumers – and so at greater risk of financial harm. If firms are going to be in a position to understand and meet the needs of these customers, as we expect them to, they need to consider whether they have the diversity of background, experience and the right culture to overcome biases and meet these needs.
But it’s not just consumer facing firms that need to consider this. If we look at capital markets: are firms sufficiently diverse and inclusive themselves in order to consider both the challenges and opportunities in the market? Are they prone to groupthink? What does a lack of diversity in a company mean for the firm that’s underwriting its IPO?
If we look to venture capital, research has shown that between 2009 and 2019 only 38 black entrepreneurs received venture capital funding. Alongside their teams, they received just 0.24% of the total sum invested. 0.02% of total venture capital invested went to black women entrepreneurs.
This raises questions about whether the firms providing capital are sufficiently diverse and inclusive to fully consider the range of opportunities in the market, or whether there are biases preventing them from tapping into these.
Research has also suggested that greater gender diversity improves risk management culture and decreased the frequency of European banks’ misconduct fines. It’s clear that there are benefits to greater diversity and black inclusion is very much an important part of that.
This goes beyond regulated firms: we want to hear from a more diverse range of stakeholders. Trade bodies, think tanks, charities and so on, should also seek to be more representative.
These are all things we care about as a regulator. To have diversity at junior level is important, but it’s even more important that these employees thrive, prosper and are able to progress to becoming decision makers. We want to see improvements within firms, and we are considering how to best use our powers.
That includes looking to our supervisory toolbox, and whether the diversity of management teams could be part of considerations for senior manager applications. We are also exploring the listings framework in the context of D&I, and are considering whether firms should comply or explain a lack of diversity at senior levels.
As this report so clearly demonstrates, you cannot have meaningful representation without inclusion – black employees must feel able to speak up and feel like they are being listened to. This goes hand in hand with our work on firm culture and is something we care about as a regulatory issue.
Our CEO, Nikhil Rathi, spoke at the Women in Finance Charter Annual Review last month. In his speech he set out the potential for a conduct question for firms on diversity and inclusion: is your management team diverse enough to provide adequate challenge and do you create the right environment in which people of all backgrounds can speak up?
A truly diverse and inclusive culture is also one where management listens.
Leading by example
Diversity and inclusion have been important to the FCA for some time both as a regulator and as an employer. The events following George Floyd’s murder drove very open discussions across the FCA. These discussions made us think how we could do more and do better as an employer. We listened and recognised our challenges.
Our Ethnicity Action Plan, published last year, focusses on ensuring a pipeline of talent, supported with training and development and with accountable management.
We know that we have an imbalance in representation across grades. We have a far larger proportion of black colleagues in junior roles than in senior roles, and we are taking action to improve that.
We have also been setting targets for senior management representation at BAME level since 2016. Last year, we published our ethnicity pay gap for the second time, but we also increased transparency by breaking it down further into the UK census ethnicity categories, recognising that the BAME grouping masks the underlying challenges faced by different groups. It’s important that we recognise that as we look at the specific challenges that black colleagues face in financial services.
We also need to make sure we recognise intersectionality, and that while we face many of the same issues, black people are not all the same. We have different experiences as a result of background, sexual orientation, gender, having a disability, and so forth.
Finally, I want to make clear that D&I is not about competing priorities, just a need to recognise that groups are different and we need to think about how we include them in different ways. Black inclusion is very much a part of improving D&I.
And for change to occur, leaders must commit to meaningful action in how they conduct their business, lead their organisations and serve a diverse range of communities.