Engaging with London Stock Exchange Group on Ethnicity Pay Gap Reporting

By Eleanor Walley

In this article we outline a recent engagement project where we joined a coalition of investors working to improve corporate reporting on ethnicity pay gaps. We encouraged a third party fund that we invest in to join a specific call with the London Stock Exchange Group (LSEG).

 

The ShareAction Good Work Coalition ethnicity pay gap reporting campaign has recently focused on two areas: financial services and the food sector.

Financial services companies play a pivotal role in influencing business practices across other sectors due to their dual role in the economy as corporate entities and through capital allocation. (1)

London Stock Exchange Group (LSEG) is one of the companies that the Coalition has been engaging with on this topic. Castlefield does not directly invest in LSEG, but our portfolio funds invest in a third party fund that has a holding in LSEG. We contacted this external fund manager to make them aware of this engagement and encouraged them to get involved.

They agreed and joined in the company engagement call, along with Castlefield and other investors from the Good Work Coalition. The aim of the online meeting was to encourage LSEG to improve its ethnicity pay gap reporting.

LSEG began reporting its ethnicity pay gap in December 2022, following ShareAction engagement in April 2022.

The objective of this engagement was to understand why it uses a different methodology to its peers, thereby making direct comparisons between companies more difficult. LSEG was able to explain that its chosen methodology is used by some large US companies and also consultants with whom it is working.

The aim of the online meeting was to encourage LSEG to improve its ethnicity pay gap reporting.

We also highlighted the importance of reporting its ethnicity representation in each pay quartile, as well as disclosing the mean and median bonus pay gap. The company explained that a key challenge in providing granular pay gap data, for example disaggregating UK data by ethnicity, is the smaller number of employees in each category.

LSEG is focused on balancing the desire to improve transparency, whilst also retaining and building trust with staff.

Earlier this year, the UK government claimed it would require large companies to publish ethnicity pay gap reports. Gender pay gap reporting has been mandatory for companies with over 250 employees since 2017 and we urge the government to take the same stance on ethnicity.

LSEG is focused on balancing the desire to improve transparency, whilst also retaining and building trust with staff.

In the meantime, we will continue to support the Good Work Coalition in a collaborative drive on this important topic.

Written by Eleanor Walley

References

(1) https://cdn2.assets-servd.host/shareaction-api/production/resources/reports/Ethnicity-pay-gap-toolkit_2023-07-19-131921_pmyy.pdf?dm=1716973066