The Culture Conundrum: unpicking inclusion and governance

The regulatory focus on corporate culture was initially targeted at challenging the status quo in the wake of the financial crisis in 2008/2009 – too much group think, too little effective challenge were the charges laid at the industry’s door. Financial services as a sector had also lost consumer trust – and is still battling to repair the damage. The regulatory drive has included a shift to the Senior Managers’ Regime which aims to provide clearer channels for making business critical decisions and for outlining personal responsibility for those decisions. In lockstep with these changes, we have seen sustainable finance move in to the mainstream and increasing social awareness of the need for (and value of) greater diversity and equality of opportunity across all walks of life. Defining the purpose and culture of a business has never been more important. But where to start?

The Panel: Chair Dawn Hyams, The Wisdom Council; Georgina Philippou, FCA Senior Adviser, Public Sector Equality; Bev Shah, founder City Hive; Alexandra Stanton, lawyer, corporate culture consultant and Women in the COO Ambassador; Natalie Gill, director of membership Women and Banking in Finance (WIBF); and Anna Lane, CEO The Wisdom Council and President of WIBF

Our top 6 takeaways from the panel discussion, 7 July 2021


  1. The FCA is serious about culture

Why does culture matter to the regulator? This becomes clearer when you look at the markers of healthy culture that the FCA outlines: purpose, effective leadership, appropriate governance and inclusive people policies. A healthy culture creates firms that reflect their customer base. That open, inclusive culture ultimately makes a firm’s governance more effective – meaning anyone regardless of their background feels comfortable raising concerns and knows that their voice will be heard if they challenge decisions they don’t agree with. Constructive debate and challenge in an inclusive organisation lead to better decision making and better consumer outcomes. There is also plenty of evidence out there that diverse businesses are more successful commercially. And the regulators want firms to participate in the debate – hence ‘DP 21/2: Diversity and inclusion in the financial sector – working together to drive change’:

Georgina Philippou, FCA Senior Adviser, Public Sector Equality
“We really want to move the dial. We would like to see more diversity and inclusion from regulated firms. Ultimately, we want diversity and inclusion to result in better consumer and market outcomes. We want better data collection and data use too. So, my plea to everybody is, read it and please respond. Only by getting a diversity of responses will we, further down the line, produce a sensible consultation paper, and be in a position to introduce interventions later that really do move the dial.”


  1. Middle management mentality matters

Apart from being tricky to say, this can also be something that firms don’t fully appreciate. The cultural tone in an organisation is set by the board, but it is middle management who are often charged with the day to day decision making that shapes that culture. Ensuring middle managers are committed to the values of the business in the way they conduct themselves is critical to a healthy culture.

Bev Shah:
“People at the top have woken up. There is only one direction of travel for diversity and inclusion and “the middle” are going to have to get on board at some point. If they don’t care about it philosophically, you need to think about how you make those people care.”

Alexandra Stanton: “Middle managers are the most influential people. We need to do more on how we can motivate them because we need to get them onside.”


  1. Culture can be mapped and measured

Financial services is a sector with numbers and analytical thinking at its heart. Culture can be seen as a nebulous concept and some firms shy away from tackling culture because it is ‘too hard to measure’ and, therefore, hard to chart and demonstrate progress. However, there are ways of thinking about diversity and inclusion, equality of opportunity and (by extension) culture that do lend themselves to mapping and measuring.

Georgina Philippou: “I do think that you can sensibly use quantitative measures. So, for example, who are your new starters, where are they coming from? Who’s been promoted? Who’s had the pay rises and the really exciting project opportunities? Who’s leaving and why are they leaving? And then of course, qualitative measures including staff surveys and social media and investors’ feedback that will help you build a coherent narrative on your company’s culture and how inclusive you are.”

Natalie Gill: “Data is really useful in highlighting missed opportunities [for change] and understanding what behaviours are driving those.”


  1. Diversity in governance and oversight does make a difference

Governance and oversight structures only work effectively if a healthy culture gives individuals within those structures permission to challenge and test and improve the system. As an industry, can we build and distribute genuinely inclusive products if we don’t have a diverse population within our firms? How can we understand and respond to customer needs if we don’t understand and relate to our customers?

Bev Shah: “As an industry, if we are taking our role as stewards and TCF seriously, you need to look at your clients, the data on the diversity of our client base – not just the high-net worth clients but everyone in society from the most vulnerable – how can you create a better product if you don’t have them in your team to create that product?”

Georgina Philippou: “The best organisations consider diversity and inclusion as part of the business as-usual piece. They think about it from the very beginning from design and advertising, right through to complaints and compensation – not just someone putting a D&I lense on it just before they launch a product.”

Anna Lane: “The challenge for the asset management industry is it’s so intermediated and the data isn’t readily available easily. So, if you’ve got a heavily-intermediated distribution, on the one hand you should be considering much more diversity when you create product but on the other, actually monitoring that can be very difficult.”


  1. ESG is shining the spotlight on financial services

There is no doubt in my mind that ESG investing principles will drive further debate about culture in the industry, and that view has not changed. As asset managers shine a light on corporate practices in an effort to drive environmental and social impact, their own behaviours will be scrutinised. Customers are wary of greenwashing – not just in the sustainable products that they buy, but in the behaviours of the firms who distribute them.

Bev Shah: “We were talking about diversity in siloed women’s networks. Now culture has become a part of the ESG debate. A lack of progress on diversity and inclusion might not be seen as a reason to disinvest, but poor culture is.”


  1. The key to instigating change is keeping the conversation alive…and bringing it to life

The contributions from the panel and the discussion online by those who had logged on to view the webinar demonstrated a real drive and determination to shift the dial on culture. Yet, we all recognised that we were talking in somewhat of an echo chamber as representatives of women’s networks or the wider diversity and inclusion community, or simply people who were engaged enough to want to give an hour of our time to the debate. Underlining the real world benefits of driving cultural change can keep the conversation alive with senior teams and across the organisation.

The vocal social campaigns targeting prejudice have put D&I front and centre as a live issue. The drive towards sustainable finance, ESG and active stewardship is putting the levers to effect change in the hands of shareholders and will make it impossible for boards and senior managers to ignore. Paying lip service to these issues is not enough – it is time for firms to walk the walk. How effectively firms rise to the environmental and social challenges confronting them will be a huge driver of future business success.

The Bank of England are asking for comments by 30 September 2021 on ‘DP 21/2: Diversity and inclusion in the financial sector – working together to drive change’. TWC and WIBF will be submitting a response to the paper and we urge you to do the same.

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We believe that the finance industry can play a significant role in addressing today’s social and environmental challenges. Working collaboratively across the industry, we play our part in the transition to a more sustainable future.

The Wisdom Council