Bower v Schroder Securities Ltd

Just before Easter the national newspapers picked up on the case of Julie Bower, an equities analyst who won claims of unfair dismissal and unlawful sex discrimination against Schroder Securities in the employment tribunal. The tribunal found that Ms Bower was the victim of a plan by her manager to drive her out of the company and that this, and the low level of a discretionary award made to her, were as a result of sex discrimination. Perhaps of more general concern are the tribunal’s criticisms of Schroder’s practices in awarding bonuses and promoting employees, practices which are certainly not unusual in the City. Those with similar practices may therefore want to review them in the light of this case.

Schroder’s bonus scheme
The tribunal found that there was no written document setting out relevant principles or criteria for deciding the level of discretionary bonuses. The Respondent’s parent group would decide on a pot of money depending on the overall success of the group and would then allocate some of this to the Respondent based in part on its performance. The Respondent would then allocate money to individuals.

The tribunal accepted oral evidence that the amount awarded to an individual would depend upon:

• (a) performance, both team and individual, measured by the following:
  • external surveys (eg Reuters)
  • client surveys
  • client feedback
  • cross-appraisal input from sales force
  • input on forms from corporate finance, including contribution to corporate fee income and relationships
  • ‘ownership’ of stocks i.e. whether stocks followed analysts’ predictions
  • perception as a team player/attitude/how user-friendly
• (b) market value of the analyst, using limited information about level of bonuses paid by competitors and what the Respondent thought a poacher might pay.

There was no mathematical formula or single factor which had to be satisfied.

The tribunal found that “the bonus setting process was even more opaque” than the witnesses would have them believe – “it was hard to conceive a process more lacking in transparency. There were no written records of the reasons for a bonus proposal, the debate about it or the reasons for a final award”. The line manager C created a first list of proposed bonuses, and his boss T then picked on some of these and required him to justify or reduce them. T then went through the same process with his own manager. Information as to performance was available to C and T but there was no evidence as to how C set about turning that information into proposed bonuses. The tribunal concluded that figures were “plucked very largely from the air” – “there was no logical process undertaken by which a calculation was performed and a figure arrived at.”

Schroder’s inability to produce any convincing explanation for how figures were reached exposed it to a much greater risk of the tribunal inferring that the reason why a woman was given a low award was her gender. In this case, the tribunal found that the low award would only be appropriate to a poor performer and it was clear that C could not have genuinely believed Ms Bower to be a poor performer in view of the information which had been collected for her appraisal. The tribunal had accepted evidence that C had wanted Ms Bower out of the company and intended the level of bonus to convey the message that Ms Bower was not valued or wanted. In considering whether to draw an inference that the reason for C’s conduct was sex discrimination, the tribunal took into account:

• C’s ignorance of equal opportunities and lack of training in equal opportunities;
• C’s failure to engage in any equal opportunities monitoring in respect of proposed bonuses;
• the failure of C and the Respondent generally to adhere to Codes of Practice in respect of avoiding discrimination and awarding equal pay (for example, the tribunal was unimpressed by the failure to advertise positions above graduate level and the failure to monitor recruitment or pay levels);
• the small percentage of women in client-facing roles, in particular at a senior level;
• the fact that a higher percentage of men than women were happy with their bonuses;
• the fact that the awards made to the male comparators were based on C’s genuine view of their performance/market value whereas Ms Bower’s was not; and
• the wholly opaque nature of the bonus system.

Considering all this, and in particular the lack of any explanation as to how the figure of the award was calculated, the tribunal concluded that it was appropriate to infer that, on the balance of probabilities, C was consciously or subconsciously influenced by Ms Bower’s gender in proposing such a low bonus for her.

Promotion system
Ms Bower complained that her failure to be promoted to ‘director’ was also due to sex discrimination, as two men had been promoted. The only requirement for promotion was that the Respondent consider the employees to be excellent performers. Ms Bower failed in this claim as the tribunal accepted that the Respondent genuinely considered the two men to be excellent performers whereas it believed and was entitled to believe that Ms Bower was an average performer. The tribunal was therefore unable to draw an inference of sex discrimination from the different treatment. However, the tribunal did expressly deplore the lack of clarity about the promotion system and noted that the failure to have known and certain promotion criteria was a breach of the Equal Opportunities Code of Practice.

Conclusion
The case clearly illustrates the dangers of an ‘opaque’ bonus system. The absence of clear evidence explaining how bonus figures are arrived at enables a tribunal to infer discrimination where one group (whether it be women or a particular racial group) receive lower awards, particularly if there is evidence of the employer falling below standards of best practice in equal opportunities.

© Herbert Smith 2002

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