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With less than a year to go before the March 2019 deadline for finalizing a deal for the UK’s withdrawal from the European Union, three separate reports have come out in the past week highlighting continued anxiety among employers in key sectors about their ability to meet their labor needs in a post-Brexit environment.
First, Tech Nation 2018, the UK’s annual government report on the country’s tech sector, identified access to talent, cost of living, and Brexit as the main challenges cited by the tech community in the country’s key tech hubs of London and Cambridge. Mike Butcher at TechCrunch criticizes what he sees as the government’s attempt to downplay the elephant in the room, arguing that the report “has been heavily spun to de-emphasise the effects of Brexit on the UK tech industry”—which he says will be severe when considering the impact Brexit will have on British tech companies’ other major concerns:
In the rest of the country, access to talent was cited as the most common challenge – affecting 83% of the UK’s regional tech clusters. Access a funding was a top 3 challenge in 49% of clusters and bad transport links were also cited. Funding is clearly also Brexit-related, given that funding from the European Investment Fund has collapsed since the Brexit vote. The European Investment Bank has slashed deals with UK VCs and private equity groups by more than two-thirds, with no equivalent funding from the UK government in sight. …
However, you probably won’t get that impression from the way the report is being pitched to the media … Instead, the report is filled with heady statistics about the UK’s booming tech industry. The report also makes absolutely no mention of the effect of the UK leaving the EU’s Digital Single Market.
Another report, released on Monday by TheCityUK, an organization that promotes the UK as a global financial center, warns that losing access to European talent will have a harsh impact on the finance industry. That report, prepared in partnership with EY, urges the government to reform immigration policies to allow the sector to maintain access to a pan-European talent pool, arguing that hiring European talent after Brexit through the existing mechanisms for non-European immigrants will increase the City’s costs for hiring international staff by 300 percent. “Simply applying the current immigration system for non-European citizens to European citizens after Brexit will not work,” TheCityUK’s Chief Executive Miles Celic said in a statement carried by Reuters. In response to uncertainty over the future of UK immigration law, banks have already begun preparing to shift staff from London to other European financial centers like Frankfurt to handle their continental business.
The investment bank Morgan Stanley recently announced a set of new policies for its junior associates, offering higher base pay and a faster track to promotion, while also underscoring its work-life balance policies, Preeti Varathan reported at Quartz last week:
According to its memo, Morgan Stanley is raising base pay for associates in investment banking and capital markets by 20% to 25%. It is also speeding up its promotion timeline for high-performing analysts—the entry-level position below associate—from three years to two. The memo also reiterated the bank’s current vacation and hours policies: two mandatory one-week vacations every year and limited staffing on Fridays and weekends.
Wall Street has long had a reputation for debilitating hours, consecutive all-nighters, and frequent weekend work. But even the most competitive firms are now grappling with a new generation’s insistence on rapid promotions and better work-life balance. “The ability to recruit, develop, and retain top talent by offering attractive career opportunities is a key priority,” the memo noted.
Indeed, at a time when the labor market is tight and employers in all industries are having to compete harder for talent, it’s unsurprising to see another large employer make investments in its most junior employees. The financial sector, however, has also been grappling for several years now with a particularly difficult employer brand problem. More than ever before, prospective employees now question whether the lucrative rewards of investment banking’s traditional high-stress, high-pay model are worth the costs to their quality of life.
New York, NY, USA - August 2, 2014: Entrance to Goldman Sachs Headquarters (200 West Street) in Manhattan in Summer.
Goldman Sachs has joined the ranks of high-profile employers hit with major litigation over allegations of gender bias in pay, promotions, and performance reviews. On Friday, a federal judge in New York certified the eight-year-old case as a class action lawsuit, ruling that women who believed the investment bank had discriminated against them on the basis of their gender could pursue their claims as a group, Reuters reported.
US District Judge Analisa Torres ruled that employees and former employees could participate in the suit if they had worked as associates or vice presidents in Goldman’s investment banking, investment management, and securities divisions since September 2004, or since July 2002 for employees in New York City. Plaintiffs’ attorney Kelly Dermody told Reuters that the certified class encompassed an estimated 2,000 people.
This lawsuit is one of several brought against major financial firms over the past decade alleging gender discrimination in this male-dominated sector, where women make up about half the workforce but only a quarter of senior-level positions. Gender pay data from the UK shows that the world’s leading banks have substantial gender pay gaps, owing to the much lower representation of women in senior roles with higher earning and bonus potential—a deliberate imbalance, the litigants in these suits claim. A study last year also found that women in finance are routinely punished more harshly than their male colleagues for misconduct, even when that misconduct is less costly and less likely to be repeated.
Goldman Sachs on Friday reported its gender pay gap data in the UK in accordance with the law requiring most employers to do so by next month. According to Reuters, the bank reported a mean gender pay gap of 55.5 percent at its international business, with a bonus gap for that unit of 72.2 percent. The company’s data showed that within the international unit, 83 percent of those earning the highest hourly pay were men, while 62.4 percent of those earning the lowest hourly pay were women.
The median gaps were smaller than the mean, the BBC adds, coming in at 36.4 percent for hourly pay and 67.7 percent for bonuses. Goldman Sachs UK, a smaller unit that employs people in non-revenue positions, reported much smaller, though still significant, mean gaps of 16.1 percent in hourly pay and 32.5 percent in bonus pay. As other banks have reported, the disparity in bonuses widens the overall gender pay gap significantly and reflects the underrepresentation of women in senior roles with greater bonus potential.
Perhaps in anticipation of this disclosure, Goldman announced a plan last week to improve its gender balance. In a memo, Chief Executive Officer Lloyd Blankfein and President David Solomon stressed that men and women at the company are paid equally for equal work, but acknowledged that women are underrepresented, particularly in senior roles. The bank’s leaders declared a long-term goal of having women make up exactly half of the company’s workforce, Bloomberg reported on Thursday. They did not set a timeline for this ambitious goal, but as a first step, will ensure a 50/50 gender split in each class of fresh graduates Goldman hires by 2021:
Several major financial institutions in the UK have submitted their gender pay gap figures to the government in recent weeks in compliance with the law requiring them to do so by April 4. The data illustrate just how far the sector has still to go if it intends to achieve gender parity in earnings and career progression. The most recent bank to release its pay information is HSBC, which on Thursday reported a median pay gap of 29 percent and a mean gap of 59 percent based on hourly pay in 2017, the BBC reports. The bank also a median gap of 61 percent for bonus payments.
HSBC says these discrepancies are due not to pay discrimination, but rather to the underrepresentation of women in its leadership:
HSBC said its pay gap was largely down to the fact it – like its rivals – has fewer women in senior roles, with just 23% of higher positions held by women. Across the whole organisation, however, 54% of its workforce is female. HSBC has a target to try to improve its gender balance and aims to have 30% of senior roles held by women by 2020.
Barclays, meanwhile, revealed a median hourly pay gap of 43.5 percent, the BBC reported last month, greater than all but 28 of the 1,154 companies that had published their data so far. Lloyds Banking Group and the Royal Bank of Scotland reported average gaps of 33 percent and 37 percent, respectively, Bloomberg reported, highlighting that these wide gaps also reflected a dearth of women in senior roles—an imbalance the banks said they were committed to addressing:
The gender pay gap “is not where we want to be,” RBS Chief Executive Officer Ross McEwan, said in a call to reporters Friday. “We need to have more females in senior roles and we set some ambitious targets in the next three years to improve it and that’s what affects the gender pay gap.” Men make up about 70 percent of the employees in RBS highest-paid quartile, mirroring the proportion of women in the bank’s lowest-paid quartile. … Lloyds said Friday that its bonus gender gap was around 65 percent.
That the financial sector suffers from significant gender gap is not new: It’s one of the reasons why London’s overall gender pay gap is higher than any other region of the UK. Common among these firms is the concentration of women in lower-ranking roles with less bonus potential than their mostly male superiors.
American Express has joined the ranks of major US financial firms pledging to identify and close gender-based pay disparities within their workforce in response to pressure from the activist investor Arjuna Capital. On Wednesday, the credit card company told employees that its most recent pay analysis, conducting with a third-party consultant, “found no evidence of bias in our compensation processes and indicated we were effectively at parity,” Bloomberg reports. The company also told Arjuna that it would report any findings on pay disparities to its shareholders by the end of 2018:
“Women are still 20 percent more likely to leave a career in finance than any other industry — that’s bad for business and it’s bad for investors,” said Arjuna Capital managing partner Natasha Lamb, who filed a shareholder proposal seeking the pay disclosure at American Express and eight other companies this year. Calling equal pay “a critical first step” to retaining top talent, Arjuna withdrew its proposal in response to AmEx’s pledge.
In her withdrawal letter, Lamb said AmEx’s review will include base, bonus and equity compensation, and the company will adjust pay to get to 100 percent equality. It will also disclose its methodology, according to Lamb.
Bloomberg has compiled data showing that women make up 50 percent of American Express’s workforce but just 30 percent of its management.
Goldman Sachs has put more than a dozen of its London-based bankers, salespeople, and traders on notice that their roles will be relocated to Frankfurt in the coming months, Reuters reports, amid uncertainty over the ability of banks to conduct continental European business from the UK after it leaves the EU:
After months of patience and private lobbying, the U.S. investment bank has decided it can no longer wait for clarity from lawmakers on how its business might be impacted by Britain’s exit from the trading bloc and is taking the steps to minimize disruption to clients.
It has informed members of its London-based derivatives and debt capital markets teams working on German accounts that their activities will be relocated to its base in Frankfurt and to make the necessary preparations to move to those offices by end-June, the sources told Reuters.
A source tells Financial News that these transfers are part of a broader strategy to move staff closer to their clients and not part of Goldman’s Brexit contingency planning. However, the report comes just days after UK Prime Minister Theresa May that the divorce agreement would not retain the existing arrangement of “passporting” rights that allow financial firms to sell their services across the EU upon being licensed to do so in just one member country. The financial sector and industry groups have lobbied the government to maintain the passporting agreement, but May said Britain would not become a “rule taker” deferring to the authority of Brussels and would instead seek “a new relationship on financial services based on this concept of mutual recognition.”