Blog
Pay, incentives, gender, and the case of the RBS Chief Executive
The subject of Stephen Hester’s bonus has been exercising commentators on politics, business, and labour relations. It has variously been framed as an issue of Stephen Hester’s honour, as a skirmish in the global war for talent, and of the awkward symbolism of one man receiving so much from the publically-owned pay pot while public sector pay freezes bite for other workers.
Hester’s bonus occupies the most recent paragraph in the story about pay, incentives and fairness that has emerged from the banking crisis. The engineers of opaque CDOs, who built houses of cards at the heart of august institutions, did so in part because they were incentivised to take risks, and because they bore no personal costs for their eventual collapse. The Walker review identifies remuneration as an key area of risk that boards need to bring in scope, to call time on pay policy that acts against the medium-term interests of the institution that is paying the salaries and issuing bonuses.
Chuka Umunna MP, speaking on Radio 4’s Today programme this morning, reminded listeners of the UK Government’s commitment that banks with majority public ownership would pay bonuses to their executives commensurate with those banks meeting the Merlin targets. RBS has missed its Merlin targets for lending to small businesses, which is of no small concern to SMEs seeking capital to stay afloat. There is, it would seem, a disconnect between executive pay and the corporate behaviours that the pay is intended to incentivise and then reward.
Close the Gap has done work with a number of UK-based banks, looking at the issue of gender and reward, and has spoken to hundreds of women working across the financial services sector. These discussions paint a picture of pay structures that have the potential for great unfairness. Target-setting often functions in a way to disincentivise flexible working or part-time working, and bonuses for junior (mostly female) staff are sometimes linked to the performance of the senior (usually male) staff they support. Line managers often reward in their own image, and performance management frameworks appear to value stereotypically male attributes (aggression, risk taking) above stereotypically female attributes (team-working, building relationships).
The introduction of performance related pay, which is now a characteristic of pay policy in financial services, usually increases the gender pay gap within individual companies. It takes effort and commitment to mitigate the unintended, but nonetheless real, negative effects on women’s pay. Some banks in Scotland have made real headway on this, while others have not.
The issue, as Walker sets out, is one of managing risk. The financial services sector has not seen the torrent of equal pay cases that have swept through the pay policies of local government and the NHS, but it is not invulnerable. Close the Gap has seen evidence of unjustifiable differences in pay in some large financial services companies. However, the issue is not just about managing immediate financial and reputational risks. It is also about incentivising the types of behaviour that benefit companies and the wider economy. Scotland needs confident financial institutions that will keep capital flowing through the recovery. Scotland’s financial services sector needs staff who can build business relationships across and within communities, who can innovate in the design of products and services. Our discussion about reward must shift its focus out of the executive suite and tackle the more complex question of how, or whether, companies can use reward to drive the behaviours in which we all have a stake.
Close the Gap Newsround (8)
This weeks newsround includes articles from the Herald Scotland, The Guardian and others. Topics include occupational segregation, gender stereotyping and poverty.
NEWS - SCOTLAND
Herald Scotland
Female professorships reveal 'glass ceiling' at universities With a quote from Close the Gap
NEWS - UK
The Guardian
Campaign to get more women on BBC's Today programme
Profile of Sheryl Sandberg Facebook COO
The welfare reform bill will erode women's financial independence
Boy raised without gender stereotypes
The woman's part: is single-sex casting sexist?
Celluloid Ceiling: Women Comprised Only 5% of Directors in 2011
Civil Society Media
Reinforced glass ceiling in the voluntary sector
Age UK
Women more likely to be poor in old age
Huffington Post
Why women should become mentors
EVENTS
International Women's Day - Women in Scotland 2012 - The Big Picture
Close the Gap will be speaking at Engender's Women in Scotland 2012 Conference being held on International Women's Day Wednesday 8 March in the Royal Botanic Gardens, Edinburgh, 10am-4.30pm
The event is an opportunity to take part in discussions around; gender budgeting, occupational segregation, welfare reform and poverty, childcare, women in the economy and many more issues. For more details about this FREE event click on the link above.
UK Resource Centre for Women in SET
UK Resource Centre for Women in SET are hosting workshops on Women's Enterprise in TV. There are various dates and venues in February and March.
Research reveals the majority of women can't afford to save for retirement
Research has revealed that the number of women saving enough for their retirement has reached a seven year high. The Scottish Widows Women and Pensions Report 2011 has found that 50% of women are now saving adequately for their retirement, up from 43% in 2010. It’s not all good news though as the research also shows that more women are saving nothing at all towards their retirement, 23% compared with 17% of men. Furthermore, 71% of women say they can't afford to save long term compared to 60% of men.
The report found that when women do save, they tend to save a higher percentage of their income than men. However, the gender pay gap means that women’s earnings are lower which in turn means that the average monetary amount saved by a woman is significantly less than that of a man.
There are now more than a million women unemployed in the UK, the highest level since 1992. At the same time, there are fewer jobs, notably in the public sector, which is currently translating national spending cuts into local budget reductions. Public sector employers are more likely than the private sector to offer flexible working opportunities which enable women to combine work with caring responsibilities. Consequently, more women may be forced into looking for part-time work which is typically low-paid and low-skill.
Further attacks on women’s incomes come in the form of rising childcare costs, a cut in childcare subsidies, and fewer childcare places. In Scotland, the average annual cost for 25 hours of nursery care per week for a child under two is £5,178. The cost of a childminder for a child aged two and over in Scotland increased by 8.3 per cent almost four times as much as the average wage.
Given the impact that such changes have on women's incomes, it’s little wonder then that the majority of women can't afford to save long term.
High cost of childcare forces women back in the home
Government pushes ahead with plans to raise state pension age for women
Government U-turn on women’s pension age but millions still to lose out
The UK coalition government has announced that it is to delay the planned increase in state pension age to 66 until October 2020.
The government had planned to accelerate the raising of the state pension age for women from 60 to 65 in 2018, two years earlier than previously planned. The changes announced yesterday mean that the maximum amount of women will have is now 18 months instead of two years. Although the move will benefit 245,000 women, 2.3 million women across the UK will still lose out as they struggle to make alternative plans for their retirement on very little notice.
Many of the women affected, who are currently in their late 50s, are already seriously disadvantaged when it comes to pensions, especially those who work part-time. Most of the women will have earned less over their lifetime, have less savings, and less of a pension than men of the equivalent age. Many of the women will also have had interrupted careers due to taking time out to care for children, which means they will have vast holes in their pension pots. Many will also not have had access to company pension schemes.
High cost of childcare forces women back in the home
The latest government statistics have revealed that an increasing number of women are being forced to give up their jobs because of the high cost of childcare. The number of women who have given up paid employment to stay at home and look after their children has risen by 32,000 in the past year. The average cost of full-time childcare is £385 a month but this rises to £729 for children under the age of two.
Women are already penalised when they take time out of the labour market to have children. A lack of flexible working and a dearth of quality part-time jobs mean that, after they have children, women are very often forced to work in jobs that are well below their skill levels. Even when both parents are in full-time employment, women are still usually considered to be the main caregiver. When the cost of childcare becomes prohibitively expensive, it is, therefore, unsurprising that it is the woman who has to give up her job to take care of the children.*
With the increasing cost of childcare and the impact of this on parents, it seems that greater public investment in childcare is desperately needed. Increased provison of childcare, free at the point of use, would go some way towards rebalancing the inequality women face when trying to combine a career with parenthood.
*This refers to mixed sex relationships. There is little evidence about the dynamic of childcare in same sex relationships.
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