Last March 8th, during International Women’s Day, a statue of a girl defiantly standing in front of the iconic bull statue in Wall street sparked conversation regarding the huge misrepresentation of women in certain fields like finance.
This statue was part of a campaign ignited by State Street, an asset management firm that manages around 11% of the world’s assets, that seeks to get more women in corporate boards. This action was followed up with a letter directed to all of the companies that comprised the Russell 3000 index, persuading them to take action and add women to their boards.
It is a fact that women are clearly underrepresented in this industry, a Morningstar study showed that “Less than 10% of all U.S. fund managers are women; women exclusively run about 2% of the industry’s assets and open-end funds. By contrast, men exclusively run about 74% of the industry’s assets and 78% of funds, with mixed-gender teams accounting for the balance.” This phenomenon is true not only in senior levels, but all across the industry. According to a Harvard Business Review research, in other specific areas in finance like private equity, venture capital, and real estate women make up only 17 percent to 23 percent of all employees.
So, there is clearly a ratio that shows the reluctance of this industry to welcome women, but is it fundamentally an issue? Is there anything else, besides the strong misogynist underlying of the industry, and a politically incorrect dynamic that is detrimental to anyone? Well, actually there is. In an industry where for obvious reasons, there is a strong focus on the ultimate bottom line – profits-, financial performance is being affected by this dynamic that we see as inherent to the industry. Various studies led by firms like McKinsey & Co. and Catalyst, show that, in general, the increase in number of women in boards is associated with better financial performance. Not only this shows the need to pursue a benefit, but also various studies show that men’s wrongdoings in this industry are proportionally way more frequent and catastrophic that women’s. A research lead by Stanford University and the University of Chicago studied the cause and impact of misconduct in financial services. Males are three times more likely than women to engage in risky investments, negligence, and fraud. These misconducts are not only more frequent but in a higher degree; male errors are 30% more expensive for firms. The median of male errors being $40,000, and for female errors being $31,000.
Some studies, like the one led by Goldman Sachs, suggests that this a physiological consequence since higher levels of testosterone is correlated with more frequent trading, increasing the risk of losses.
Now, if having a more reasonable ratio of women is not only fair and logical, but also beneficial; why is there still such a huge gap between a woman’s potential in this industry and that of a man? The roots of this issue could reside in the origins and nature of the industry itself, it has always been a predominantly male industry in which a factor for people’s success is the degree of comradery and their connections. As we know from social psychology, the similarity/attraction bias explains how we are inherently attracted to favor those who are similar to us, which could have led men to perpetuate this bias towards women
Moving forward from the origins of this dynamic, the importance of discussing this topic is to create a response and consciously change biases in order to benefit society and the industry. State Street in not the only firm calling for change, a myriad of other firms worldwide echoed these concerns and have stepped up. Some of them are BBVA Spanish financial services company, with their maternity initiatives - of the women 2,273 that went on maternity leave in 2012, 100% came back to their same jobs-. Also, in 2008 Calver Investments launched a Gender Equality Principles (GEP) campaign that provides resources for companies to guide them step by step in the implementation of processes that promote gender equality in their policies, practices, and culture. And other companies such as Pax Investments have even directly leverage from these findings. They created the Pax Global Women’s Leadership Index in which investors can invest in companies where there are tangible actions towards gender equality. They have also sent letters to the SEC urging them to request companies to disclose gender-related information such as pay equity data.
This is certainly a movement that is shaping the financial services industry, directing it to a more egalitarian future in which everyone can benefit from equality, fairness, and diversity. All the aforementioned actions are inspiring and show a great response from firms that feel the social obligation to shape societies and improving their own performance along the way. There is so much more to do and high expectations to meet. For instance, some other organizations like 20/20 WOB expect that by 2020 women make up of at least 20% of directors in boards. Others more ambitious like Girls Who Invest, are aiming for 30% of the world’s investable capital to be managed by women by 2030. Whether we get there by that time, or even exceed these expectations is up to everyone who can make a difference; meaning, anyone.