Central Bank plans to challenge firms over their lack of diversity

The Central Bank has said it plans to challenge firms over their lack of diversity at board and management levels and has linked the issue to the kind of problems that arose during the financial crisis.

Deputy governor Sharon Donnery said a lack of diversity, gender or otherwise, at senior management level was still being identified in many firms under its supervision.

Speaking at the Central Bank of Malta’s 50th anniversary conference in the Maltese capital Valetta, Ms Donnery said diversity can lead to improved outcomes in terms of governance, decision-making and productivity.

Conversely, the lack of it can result in traits such as groupthink, poor risk assessment and insufficient challenge.

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In the absence of voluntary improvements in diversity on the part of firms, Ms Donnery said the Central Bank was considering putting specific requirements in place to force firms into changing their div

“We want the firms we supervise to make good decisions, take considered risks and not suffer from groupthink,” she said.

Ms Donnery is responsible for the Central Bank’s first gender pay gap analysis, which revealed that 50 per cent of Central Bank staff are male and 50 per cent of staff are female, with women making up 39 per cent of directors and 49 per cent of division heads.

There are some differences in gender profiles across different grades and consequently, there is an overall difference of 2.7 per cent between the average pay for males and females across the Central Bank.

Ms Donnery said while the Central Bank’s pay gap is less than other organisations, there is room for continued improvement.

Addressing the issue of risk taking by regulated firms, Ms Donnery explained that knowledge of risks can improve where there is gender diversity on the board “as risks are more carefully examined, weighed and challenged”.

“We are placing a spotlight on this issue, and intend to keep it there. We are doing so not from an ethical perspective, important though that is,” she said.

“ We are doing it because there is a sound business case for diversity - one which can contribute both to the bottom line and the public good,” she said.

Ms Donnery said the Central Bank was actively considering what steps it should take in this area, particularly if raising awareness has insufficient effect. “We would prefer to see the firms we supervise taking steps to increase diversity levels on a voluntary basis,” she said.

“ But in the absence of improvements in diversity at senior levels in regulated firms, the Central Bank will have to consider whether it is necessary to put specific requirements in place.”