Governance Watch - Issue 36

by Dina Medland in London

Gender Pay Gap

It is clearer than ever that for change to take place on gender equality, we need to have women in leadership positions. Nicky Morgan, the Conservative MP for Loughborough and the first female chair of the Commons Treasury select committee, made her astonishment at the gender pay gap in financial services public in an opinion piece in The Guardian, when she outlined next steps for the Women in Finance inquiry. Now we have its report, which finds ‘alpha male culture’ to be the main reason women don’t want to work in senior management in this industry. 

MPs have called for the UK’s banks and other financial institutions to do something about it. The parliamentary report found that the median bonus pay gap is 49% in favour of men at UK banks, and 38% at building societies. The bonus gap is 43.5% overall, which means that for every £100,000 of bonuses handed out to men, women are only getting £56,500.

Senior women in the industry who have contributed to the report include Jayne-Anne Gadhia, CEO of Virgin Money and Anne Richards, CEO of M&G Investments. This report identifies not only the issue of male ‘culture’ used as a power play, but an acute need for clearer objective targets for awards. In calling for removal of the stigma attached to flexible working as a female phenomenon (and therefore by implication a less ambitious choice) it joins up some important dots in understanding the core reasons for the gender pay gap. With female voices speaking out at these senior levels, it will be hard for Britain’s financial services industry to ignore it.


The consultation has begun on the Wates Corporate Governance Principles for Large Private Companies, and it is open until 7 September 2018.  They are outlined here, on the Financial Reporting Council (FRC) website on behalf of James Wates, Chair of Wates Group, one of the UK’s largest family-owned construction companies, who was asked by the UK government to chair a coalition group to draw up the principles. 

Under new regulations just laid before Parliament for approval, all companies that do not have an existing corporate governance reporting requirement and fall into the category of either having more than 2000 employees or a turnover of more than £200 million and a balance sheet of more than £2 billion, or both, will now be subject to one. This new reporting requirement will apply to financial years beginning 1 January 2019 with reporting to start in 2020. Companies will be able to apply the Wates Corporate Governance Principles for Large Private Companies and meet the requirement.

While the principles are not revolutionary, they include looking at issues such as the treatment of staff and other stakeholders such as suppliers which is an important inclusion at a time of rapidly changing business models. “Good business well done is good for society. Private companies are a significant contributor to the UK economy, providing tax revenue and employing millions of people. They have a significant impact on people’s lives, and it is important they are well-governed and transparent about how they operate” said Mr Wates, when launching the principles. 

The cautious wording on remuneration in these principles reflects the sensitivity with which business regards the subject. The principles say: “Remuneration – A board should promote executive remuneration structures aligned to sustainable long-term success of a company, taking into account pay and conditions elsewhere in the company.” How that is interpreted remains to be seen. Mr Wates himself has not wavered from the view he took in an interview with the Financial Times in March. 

The coalition he chaired that came up with these principles included representation from the FRC, the Institute for Family Business, the Institute of Directors, Confederation of British Industry, the Institute of Business Ethics, British Private Equity and Venture Capital Association, the Investment Association, the Climate Disclosure Standards Board, ICSA: the Governance Institute, and the Trades Union Congress. 

For the ‘step change’ that the UK government said it intended with this broadening of standards of corporate governance to private companies, the consultation needs to hear from a diverse set of voices. 


Meanwhile, remuneration at listed businesses remained firmly in the headlines as WPP faced a difficult AGM on 13 June, with shareholder backlash over its handling of the controversial departure of long-standing chief executive Sir Martin Sorrell. The group’s remuneration report includes a £20 million pay-out to Sir Martin, making his total pay-off as an exit deal equivalent to 1,060% of his salary, which has been called “excessive.” Chairman Roberto Quarta is up for re-election. 

Quite apart from the sheer amount of money involved, this is a boardroom story that does absolutely nothing for that critical issue of ‘trust’ in business. There have been allegations of the departing CEO bullying employees, which has prompted WPP to launch of a review of its whistleblowing policies and circulate a memo to staff reminding them that employees should expect to be treated with respect by colleagues.

Sir Martin Sorrell has denied the original Wall Street Journal report over his departure, the conclusions of an internal inquiry remain unpublished despite repeated calls for them to be made public, and there have been questions about how long chairman Roberto Quarta will last.

As far as whistle blowers are concerned, the inadequacy of protections for those who reveal misconduct occurring in the workplace is a very real issue and the International Bar Association (IBA) has recently published Whistleblower Protections: A Guide.


Dixons Carphone has admitted a huge data breach involving 5.9 million payment cards and 1.2 million personal data records. This is a hack that happened nearly a year ago, but is now being revealed. As the BBC report says, “Luckily for Dixons, the incident happened before the new GDPR rules, which promise much bigger fines, came into force.”

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