International Women's Day is marked on 8 March, and revolves around a specific theme each year. This year the theme is #EmbraceEquity. What does that mean?
Equity is distinct from equality. It recognises that each person has different circumstances and allocates the appropriate resources and opportunities needed to reach an equal outcome. Think of an Olympic racetrack, where the runner on the outside track starts ahead of the runner on the inside track. This accounts for the fact that the outside runner has a longer distance than the inside runner. Achieving equity can sometimes be perceived as unfair. The outside runner looks as if they're starting in front, when in fact their starting position addresses the underlying imbalance. This is why allies are incredibly important to help bring about change through equity, as those on the inside track can acknowledge their advantage and encourage an equitable approach for those on the outside track.
Mishcon de Reya has actively participated in the promotion of gender equity through our series of "Bloody Difficult Women" events, and the content produced by our Women in Wealth group on our website and through social media.
To explore the theme of #EmbraceEquity, our Women in Wealth team has highlighted some of the gender equity issues in the practice areas we advise on.
Tax and wealth planning – pension inequality
Research shows that women of retirement age have nearly three-quarters lower pension income than men, and nearly two-thirds of women have no private pension wealth. This reflects the existing gender pay gap, but there are other factors at play.
Women have historically borne the bulk of caring responsibilities at home and are therefore more likely to be out of work or in part-time work. Employers in the UK also do not need to make pension contributions for low-income workers. Pension inequality is a symptom of multiple points of inequity in earnings and employment for women, and is one of the more easily quantifiable examples of gender inequity.
Finance and banking disputes – gender diversity at board level
According to the Staff Working Paper No. 929 of the Bank of England of July 2021 women made up only 9.7% of CEOs of the 181 UK banks and building societies at the end of 2020. The situation with the female representation on the board of financial institutions is slightly better. The 2021 Women in Finance Charter Annual Review reports that in 2020 there was, on average, 32% female representation in senior management amongst charter participants. Amongst the UK leading banks, only Nationwide Building Society reached a threshold of 50% female representation on their board by September 2022.
In April 2022 the FCA finalised proposals to boost diversity on listed company boards and executive committees. The following requirements have been added:
- At least 40% of the board should be women.
- At least one of the senior board positions should be a woman.
- At least one member of the board should be from an ethnic minority background excluding white ethnic groups.
This is an area that should be of a particular focus for activist shareholders of the financial institutions, should they want to drive diversity in their companies. Therefore, in this particular instance gender diversity can be improved by adding such requirements to the charter documents of the companies related to the composition of their boards.
Employment incentives – inequality with share options
Share options are used as a method of attracting and retaining employees and in return offer employees a sense of ownership which can become extremely valuable if the company does well. New studies suggest that male employees are more likely to be granted share options than their female counterparts. This is reflective of the current gender pay gap and also further illustrates a disparity in pay between men and women, particularly at senior levels.
As share options are particularly popular in fast growth companies such as those in the technology sector, these new figures may also indicate an underrepresentation of women in these sectors. It is important that women are empowered to understand this form of compensation so that they can put themselves in the strongest financial position going forwards.
Private commercial litigation – gender in family businesses
Research shows that family businesses in certain sectors have higher levels of diversity than their non-family business counterparts. 17.7% of family SMEs were led by women compared with 13% of non-family SMEs in 2020.
Earlier this year, Delphine Arnault, daughter of Bernard Arnault, was appointed as new head of the fashion and beauty brand, Christian Dior, ahead of her siblings. Shares climbed nearly 2% following the announcement. Despite such success stories, there remains significant room for improvement of gender diversity in family businesses.
It is suggested that family businesses are often led by men due to deep-rooted gender biases passed down through generations. Traditionally, family businesses may be passed down to sons, who are raised surrounded by the decision making of business. Daughters on the other hand are often not given the same exposure and, although they may ultimately receive ownership in the business, whether that be through a partnership, trust or otherwise, are less likely to obtain key roles.
We regularly advise family businesses on disputes and have seen the difficulties which arise following the imbalance of roles. For example, family members without a decision-making role may find themselves exposed to complex litigation against the business and to decisions taken by their family members. These disputes are often led by emotion and the primary objective is often achieving an equitable outcome for either side. As more and more women take on leading roles in family businesses, it is important to ensure that they are equally aware of the potential liabilities which may come with the role so that they can protect themselves in the best way possible.
Family – financial remedies on divorce
It is over 22 years since the seminal decision of the House of Lords in White v White  1 AC 596, in which the court considered that, when considering how assets should be divided between a couple on divorce "a judge would always be well advised to check his tentative views against the yardstick of equality of division. As a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so." While the decision remains applicable to judges today, the longer term outcomes for women on divorce are bleak.
Historic data (such as a 1997 paper by Sarah Jarvis and Stephen Jenkins, providing longitudinal evidence from the first four waves of the British Household Panel Survey) examining income differences from the year before separation to the year (and occasionally, two years) after separation indicated that the median percentage net income change for men was a 2% rise after separation. The median percentage change in net income for wives was a decrease of 18%.
Adjustments for housing costs made little change to the figures. The Family Court does not consider income to be a resource to be "shared", but will only tend to award periodical payments (maintenance) from one party to a divorce to another where the recipient can show that they have a "need" for that additional income. Even then, any award is limited in time where possible. Accordingly, the change in approach following White v White does not necessarily include an adjustment in the income position of the parties. Further, as was noted in Miller v Miller; McFarlane v McFarlane , a breadwinner's unimpeded earning capacity can frequently repair any loss of capital.
In terms of pension wealth, the position for women after divorce is equally dispiriting. A Pension Policy Institute report on pensions on divorce, released in September 2021 estimated that for divorced men in the 55 – 64 age group who were not cohabiting, their median pension wealth was £100,000. For divorced women, it was £19,000.
Concerningly, the Government's quarterly Family Court statistics indicate that there are consistently fewer than half the number of applications for financial remedy on divorce being made as there are applications for a divorce, suggesting that many couples are not obtaining the security of financial provision at all.
Discrepancies in assets, income and pensions following divorce are not issues that can be resolved solely through the courts. However it is important for those assisting the more financially vulnerable party to a divorce (still more often the wife in different-sex marriages) to be aware of the importance of the longer term picture, rather than immediate capital provision or income needs.