City bonuses should be linked to the number of women in senior roles, a Government-backed review claims today.

The report, ordered by the Treasury, says financial firms need a ‘wake up call’ about the shortage of women in their boardrooms.

It recommends that the bonuses of each company’s executives should be dependent on them meeting targets for gender equality at senior levels.

The report, which was led by Virgin Money chief executive Jayne-Anne Gadhia (pictured), will present its interim recommendations to industry figures at an 11 Downing Street summit today

The review also says City firms should be made to publicly report their balance of men and women and appoint an executive to monitor ‘gender, diversity and inclusion’.

It follows a separate government-backed report last week which called on Britain’s top 350 companies to ensure women make up a third of their board members by 2020.

Many business chiefs welcomed the proposals last night, saying that threatening to limit bonuses was the best way to ‘focus bankers’ minds’ and remove bias against women in the City.

But some suggested trying to improve gender equality by linking it to executive pay was a ‘flawed solution’. One expert claimed it could lead to the creation of a small band of elite senior women on huge salaries at the expense of junior female staff.

The report, which was led by Virgin Money chief executive Jayne-Anne Gadhia, will present its interim recommendations to industry figures at an 11 Downing Street summit today.

Mrs Gadhia argued her proposals would speak to the City in language it understood, saying: ‘My report proposes addressing the issue in a way that the City will recognise – make it public, measure it and report on it. What gets published gets done.’

She added: ‘It should be a wake-up call to everyone in financial services that fewer women progress to senior levels than in any other industry in the UK. There are many views as to why that might be. Motherhood, remuneration, the “old boys’ network” are all mentioned, but only scratch the surface.

‘Businesses will increase productivity and improve results by encouraging more women into senior roles. But the approach needs to fit the individual organisation and the women involved.’

City bonuses should be linked to the number of women in senior roles, a Government-backed review claims today (File picture)

However, John Thanassoulis, professor of financial economics at Warwick Business School, said her idea was a ‘flawed solution to a real and serious problem’.

He claimed linking executive bonuses to the number of women appointed to boards would create two issues. ‘Firstly when firm performance is poor CEOs and senior executives can still secure their bonus by promoting a woman to the board,’ he said.

‘Secondly, linking pay to the proportion of the most senior executives who are women will likely create a small band of elite women who secure huge salaries as firms must hire them – while leaving many other women out in the cold.’ He said efforts should focus on women across a whole company, not just the very top.

Only last week, a report by the former trade minister Lord Davies found that, for the first time, there were no longer any all-male boards in the UK’s top 100 firms.

The proportion of women on FTSE100 boards is now around 26 per cent – more than double the figure for 2011.

However, Lord Davies said there was still much to be done, calling on firms to aim for a new target of women making up a third of board members at the biggest 350 companies by 2020.

He also raised concerns that most women on boards were non-executives who did not have a role in day-to-day operations – but said legally enforced quotas would be ‘unwarranted’.

Last night, Economic Secretary to the Treasury Harriett Baldwin said: ‘Financial services is at the centre of driving productivity ... but it’s also a sector where the problem of gender diversity is particularly marked – especially in senior management.’

Among business leaders who welcomed the proposals was Petra Wilton of the Chartered Management Institute, who said: ‘Reversing years of unconscious bias is going to be tough – but nothing focuses a banker’s mind better than money.’