Miranda Brawn discusses supporting the next generation of business leaders and the challenges facing the financial industry
Miranda is Director of Legal and Transaction Management at an investment bank and creator of the Miranda Brawn Diversity Leadership Foundation
Can you tell us about the Miranda Brawn Diversity Leadership Foundation and its aims?
It was founded to help increase racial diversity within the UK workforce. It is focused on promising 14 to 21-year-olds, from a black, Asian and minority ethnic (BAME) background who are also passionate about diversity. The Foundation delivers diversity leadership lectures and gives annual scholarships to potential young leaders to help them succeed. The goal of the scholarship is to support and engage BAME students by providing funding, mentoring and work experience, help them develop leadership skills, and transform themselves and their communities.
The diversity leadership lecture was the UK's first diversity lecture aimed at schoolchildren. The rationale behind this was to help bring the issue of diversity to the next generation and to motivate action and change now. I believe this will help to close the diversity gap at a quicker pace, rather than waiting for the students to complete their studies and enter the workplace, only for them to realise at that later stage that there is a diversity problem.
Why is diversity on the board so valuable to companies?
Diversity is critical for an organisation's ability to innovate and adapt in a fast-changing environment – diversity of perspectives, experiences, cultures, genders, and age. It is essential to the growth and prosperity of any company. Diversity breeds innovation and innovation breeds business success.
A Forbes study has identified workforce diversity and inclusion as a key driver of internal innovation and business growth. According to McKinsey, companies with diverse executive boards enjoy significantly higher earnings and return on equity, while Harvard Business School argues multicultural networks promote creativity. Hence, successful companies are not the ones that build a business and then look at diversity as a desirable attribute. Diversity is a mentality, not just a strategic imperative.
According to the Parker review, directors of colour represent 8% of the total FTSE 100 director pool, and UK citizen directors of colour represent about 1.5%. However, BAME people make up 14% of the UK population. Why do you feel BAME people are so under-represented at the top of companies?
There has been an improved focus on gender, social mobility, LGBT and disability. However, ethnic diversity in the UK lags behind due to historical minimal attention. The statistics in Sir John Parker's report are unacceptable and require change at a much faster pace. They do not reflect the society we live in or the international markets in which the top companies operate.
It is leading to missing voices and perspectives. Whether this is due to failures in recruitment, or lack of internal opportunities or outright discrimination, the result is the same. Business and society at large are losing out on talent.
Companies need to speak up publicly about their support and strategies to increase all forms of diversity, including race. Back in 2004, a report from a government task force highlighted the race pay gap that leaves Asian and black workers earning up to £7,000 a year less than white people.
Unfortunately, the situation has not changed much during the past 13 years so the race pay gap needs to be given similar attention as the gender pay gap in order to help close it. The fact that individuals from BAME backgrounds are less likely to be in work, and when in work are less likely to fulfil their potential, is wrong and must change.
The potential benefit to the UK economy from full representation of BAME individuals across the labour market through improved participation and progression, is estimated to be £24 billion a year according to 'Race in the workplace: The McGregor-Smith Review'. The report goes some way to setting out answers for the solution, however, the issue goes beyond the business arena. It lies with society as a whole. Schools, the Government, the media, business, and other institutions, all play a part in contributing to the solution.
The report highlights how unconscious bias, even conscious bias, is prevalent. Research shows that birds of a feather really do flock together and that we are more likely to favour people with characteristics similar to our own. This is a significant factor, contributing to the lack of progression of BAME employees making it to the boardroom.
The media regularly portrays BAMEs in a negative light. But for every negative headline regarding BAMEs, there are many, many other positive stories going untold. If you are a white, male, middle-class CEO who has had little or no association with people of other races on a personal level, these negative stories may bear influence on your views.
What needs to be done to promote further diversity on the board?
Lots can be done to promote further diversity on the board, such as identifying senior sponsors within the organisations and making it a clear objective for all senior leaders. Unconscious bias training is important to tackle the long-standing inequalities that exist from recruitment to career progression.
The enhancement of transparency and disclosure are key. A description of the board's policy on diversity should be set out in the company's annual report, and this should include a description of its efforts to increase, among other things, diversity within its organisation, including at board level. Companies that fail to do this should disclose the reason for lack of compliance.
The positive impact to the UK economy if all forms of diversity are increased should be enough to encourage the most reluctant board member that action is needed now.
It is about cultural change and breaking bad habits. The nominations committee and the companies themselves can identify diverse talent by launching mentoring and sponsorship schemes. Embedding inclusive recruitment processes, transparency and equal access to opportunities are also key to delivering long-term success.
What are your thoughts on the work done by the Davies review and latterly by the Hampton-Alexander review?
The reviews by Lord Davies, and Sir Philip Hampton and Dame Helen Alexander are essential to ensure that talented women at the top of business are recognised, promoted and rewarded.
It is also important that the focus is extended beyond the boardroom. There is a lot more to do and we need to widen the net to allow for all forms of diversity, not just gender. Senior management must embrace the need for change and respond to the challenges set by the reviews to ensure there is a fair process to get to the top.
I think the proposed transparency around how many women are in senior positions and the gender balance of executive committees is a positive step. The current lack of available industry data may demonstrate that some companies are nervous about reporting diversity.
Honest conversations about the challenges will help businesses meet the targets set by the Hampton-Alexander review, and it is important to help more women get into the top jobs at all companies, not just the biggest ones. This can be used as an inspirational tool for the next generation, but also financially benefit UK business where bridging the UK gender gap in work could add £150 billion to our annual GDP in 2025. The progress getting more women into the boardroom has been encouraging, but we need to focus on all levels of the pipeline.
Are quotas or advisory targets the right approach to promoting diversity?
If we really want to start making a difference and genuinely speed up the pace of change, targets not quotas need to be considered – alongside efforts to educate, to communicate, and to change culture and stereotypes. Diversity needs to be on the board's and management's agenda continually, driven by targets with accountability.
Although some countries, such as France and now Germany, have imposed mandatory quotas for the number of women on company boards, the UK has set an advisory target of FTSE 100 board positions comprising women. A similar approach should be applied for BAMEs and other forms of diversity strands to help disability, LGBT and so on.
That said, the focus should be on selection by merit and capability. Transparency would be helpful to motivate companies to meet their targets and drive change forward. Setting targets for participation rates can in fact help organisations get closer to an objective definition of merit and thereby ensure they secure and retain the best talent. Targets and accountability will force a focus on what is really happening in the recruitment and management of talent to advantage or disadvantage particular groups.
You were recently named a Point of Light by Prime Minister Theresa May for your work with the Foundation, how did that feel?
The Prime Minister's award was a total shock as I had no idea I had been nominated for it. It was such a pleasant surprise to receive the call from 10 Downing Street to say I had won the award. To have my hard work for the past 18 years helping to create change for the next generation acknowledged felt wonderful, as well as to be recognised personally by the Prime Minister.
Following the award, I also had the opportunity to meet and discuss my work with Prince Charles and Camilla. It was a deeply humbling experience.
You are currently Director of Legal and Transaction Management at an investment bank. What are the key challenges facing investment banks today?
I am responsible for managing the legal risk for derivatives, financial regulations and securities finance business within Europe. This is a hybrid role where there are aspects of regulatory compliance with client/business management aspects embedded into my role.
The investment banks are dealing with huge challenges besides maintaining profits and complying with regulatory obligations. The financial industry is currently subject to plenty of regulations governing institutions' business capital adequacy, trade reporting, governance and operational transparencies.
There are requirements to comply with various financial regulations like MIFID II, EMIR, Common Reporting Standard, FATCA, various regulations governing AML, KYC, ATF, anti-bribery, the Dodd-Frank Act, the US Data Protection Act, the Consumer Credit Act and IFRS, to name a few.
Investment firms that are dealing with cross-border trading venues like organised trading facilities, US swap execution facilities, designated contract markets, derivatives clearing organisations, swap data repositories and multilateral trading facilities, are now further faced with European and other directives. Therefore, the complexity of assuring compliance in the various jurisdictions is significantly complicated for small investment banks.
The adoption of blockchain data technology and cyber crimes are also challenges for investment banks especially as cyber criminals are using increasingly sophisticated and unusual ways to hack financial information.
The decision to trigger Article 50 and leave the EU is driving forward the change agenda and eliciting significant pressure on the implementation of contingency plans. Nevertheless, the vast majority of Brexit-related decisions have yet to be made. Questions relating to the relocation of activities, legal entities, and business models still remain – specifically among non-European Economic Area-headquartered firms that use London as their base to access the EU.
There is also an increase in demand for strategic leaders like myself with holistic understanding of macro policy, networks within the European regulators, and legal expertise. Regulatory thinking and commercial thinking are no longer separate concepts. Banks will need additional time after the two-year negotiations are reached to change their business models in terms of hiring and setting up risk controls.
Financial firms are being challenged to develop the people of the future who can deal with business transformations, as the economic horizon has dramatically evolved following the 2008 financial crisis. There is a strong need for collaboration between technology providers, investment banks and the regulators to develop a strong global regulatory environment. Overcoming these challenges is critical for investment banks during the next few years.
Do you feel the current system of UK corporate governance is working? Are there particular areas that need to be addressed?
There is an increased realisation and acceptance that good UK corporate governance is a means to create a business environment of trust, transparency and accountability in order to support investment, financial stability and sustainable economic growth.
Although, there is no specific law to enforce the number of women and ethnic directors on the board of UK businesses, voluntary targets were first set in 2011. As mentioned, a focus on diversity with the definition of 'diversity' expanding is an area that needs to be addressed.
Other changes for the future of governance include new board committees for issues like risk management and cyber security, and greater communication between management and the board with shareholders.
One practice is unchanged – shareholders and directors continue their arcane communication process of gathering once a year for the annual shareholder meetings. The frequency of these should be increased to help improve communication. That said, there have been more governance changes in the past six years or so than in a generation. There are regulatory and investor pressures for boards and deep governance changes. The boards and management teams would do well to acknowledge these issues and act.
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