A regular briefing for the alternative asset management industry.
Many organisations, including our own, have been marking this year's Pride Season with virtual activities focused on diversity and inclusion. Making the workplace more inclusive, allowing people to bring their whole selves to work, is clearly the right thing to do – and, in the alternatives world, has been a particular focus for LPs and GPs in recent years.
The focus is welcome, because the alternatives industry (along with law firms and many other sectors) has significant work to do in this area. Research by the BVCA and Level 20, for example, has confirmed the significant under-representation of women and people from black and ethnic minority backgrounds in senior roles within the private equity industry, and more focused research shows a similar picture in venture capital. Making organisations more welcoming to everyone has to be at the heart of any attempt to redress that imbalance.
Not surprisingly, lawmakers and regulators are also seeking to drive change, and regulated businesses are an obvious target. That has also served to sharpen the focus among asset managers. In the UK, for example, the Financial Conduct Authority (FCA) is looking at specific diversity requirements as part of its work on governance. It has already been clear that it expects firms to look at their culture and consider whether it encourages people to "speak up" (a change in focus from the more negative "whistleblowing") and, when they do, whether management is ready to address concerns. Dealing swiftly and properly with incidences of unacceptable behaviour is a vital part of establishing the right culture.
But beyond general expectations for an inclusive and open culture, regulators have themselves started to take more direct action. The Senior Managers regime gives the FCA an opportunity to take account of behavioural issues in deciding whether to allow an individual to take a leadership role. Driven in part by the focus on "#MeToo" allegations, the FCA made it clear in 2018 that "the way a senior manager approaches issues around diversity may be relevant to [an] assessment of their competence and character". And, while in the past actions for misconduct by a senior manager or employee of a regulated firm would most likely arise from a breach of the regulator's rulebook, or relate to their financial dealings, a well-publicised trio of cases in late 2020 demonstrated the FCA's increasing appetite to take action against individuals found guilty of non-financial misconduct, including when the offences have no direct link to the regulated firm.
However, it is perhaps when specific allegations about behaviours in the workplace come to light that firms really need to act quickly and decisively.
...Making organisations more welcoming to everyone has to be at the heart of any attempt to redress that imbalance...