Third party harassment: the financial services angle

Much of the focus around diversity and inclusion in business has been around employee behaviour and board composition.

But a recent event has highlighted how financial services firms in particular need to be mindful that diversity and inclusion issues can arise not only from the behaviour of employees but also third parties.

In May the Financial Times reported that several “inappropriate” remarks had been made by individual investors at the annual general meeting for financial services firm Aviva, directed at its CEO Amanda Blanc.

The newspaper also reported that Aviva’s chair, George Culmer, called out the remarks at the end of the meeting, saying he did not want to hear them at any future AGM. Culmer’s actions in calling out this behaviour are a positive example of the ways in which employers can seek to deal with this type of issue.

Currently, there is little legal protection for employees who are faced with these types of issues. UK legislation making companies liable for harassment of their employees by third parties, included in the Equality Act 2010, was repealed in 2013.

This means employees wishing to stand up against harassment now either have to argue that their company’s failure to take action in relation to the harassment is an act of discrimination, or to run arguments that the failure is indirect sex discrimination. However, that is not the end of the story, particularly for regulated financial services firms, which also need to be mindful of the UK Financial Conduct Authority’s (“FCA”) expectations around diversity and inclusion issues.

Action against third parties

While the employer whose employees are subject to inappropriate comments or behaviour may be unable to take action against the individual making such comments, it is important to note that the individual’s employer may need to consider such issues, where the individual is in a senior manager or certification role. 

As well as taking action in terms of reporting such behaviours, it is also important that they are called out for what they are.

This is because such individuals must be considered by their employer to be fit and proper. As well as issues relating to honesty and integrity, an individual’s reputation may also be relevant.

In circumstances where third parties harass or discriminate against employees, firms could consider flagging the issues with the employers of the third parties. There may also be circumstances in which such issues are directly reported, or become known to, the FCA, which may also choose to take action, depending on the severity of the issues.

As well as taking action in terms of reporting such behaviours, it is also important that they are called out for what they are. The fact that Culmer immediately remarked on the inappropriateness of the comments directed at Blanc was significant, as it showed his support for the CEO. This helps create a diverse and inclusive environment within the company.

Blanc herself posted a response to the comments on her LinkedIn page, saying she was used to sexist and derogatory comments and that the more senior she had become, the more overt the unacceptable behaviour had also become.

“The surprising thing is that this type of stuff used to be said in private, perhaps from the safety of four walls inside an office – the fact that people are now making these comments in a public AGM is a new development for me personally”, Blanc added.

Blanc praised “some fantastically supportive men” for speaking out, but said it was critical for the financial services industry to redouble its efforts to stamp out such comments.

Regulatory efforts

In addition to its fitness and propriety tests, the FCA, alongside the Prudential Regulation Authority and the Bank of England, published a diversity and inclusion discussion paper last year.

The discussion paper proposed a number of changes to rules designed to foster equality, including the use of representation targets, measures to make senior leaders directly accountable for diversity and inclusion, and linking remuneration to diversity and inclusion metrics.

The regulators said increased diversity and inclusion would help create a stronger, more innovative financial services industry that was also better able to meet the needs of a diverse customer base.

A consultation paper on more concrete proposals is expected soon as a follow-up to the discussion paper.

The FCA also recently finalised “comply or explain” diversity rules for listed companies, which will require them to meet board diversity targets or explain why they have failed to do so. However, these rules do not address third party issues, or harassment.