International Women’s Day: Why we still need it, especially in finance

Why mark yet another “International Day of…”, you might ask.

My biggest reason is it’s a reminder that equality remains a long way off – and it’s especially worrying in finance. A 2018 study by Mckinsey found that, while women and men start their careers in the industry level-pegging, women end up accounting for just 19% of senior roles.[1]

That’s an equality problem, but it’s also a lost opportunity. Goldman Sachs published analysis last September which showed that, in the US, all-women and mixed-gender teams had outperformed all-male portfolio management teams year-to-date.[2] Asset management needs more women for equality reasons, but also for performance reasons.

The Fawcett Society marked Equal Pay Day last year as 20 November – after that date, the average woman in the UK would have been working for free, if her pay had been the same as the average man.

When women already earn less across society, finance tends to entrench the problem in other ways, too. Lower earners can afford to take less risk with their investments, of course. But they also receive lower pensions, and may take less risk with those pensions, too. Research published in September last year showed that pension inequality between men and women actually increased in 2018-19, reaching 40.3% – more than twice the level of the gender pay gap that year.[3]

What next?

We’ve recognised the problem in finance – and we’ve recognised that we’re a part of it. That gives us the urgency we need to interrogate our fund managers, and to interrogate ourselves. For us, this means publishing our gender pay gap reporting in our Annual Report and Accounts, among a number of key metrics. The European Human Rights Commission may have delayed the gender pay gap reporting deadline until October due to COVID-19, but it still encourages companies to still pursue voluntary disclosure. I hope companies take up the opportunity as this is one way to help change the culture of our industry.

But how can companies change their numbers? A few areas to focus on are: your hiring policy; your flexible working policy; your maternity and paternity leave policy; and your promotions policy. These areas are of decisive importance for gender pay disparities.

But I wonder if flexible working is the most fundamental. The key point at which UK men and women start to earn very different sums is in their 40s, according to government research.[4] Companies need to focus on that critical period – and the pandemic has tutored us all in the possibilities of flexible working and working from home. As a result, the industry faces a new opportunity.

If you can offer flexible working opportunities at the hiring stage, you are more likely to attract candidates with childcare or other care responsibilities. If you offer flexible working policies to existing employees, they are more likely to stay on when their own circumstances change – and more like to get promoted.

I’ve found that, when employers provide some flexibility over working practices, like where and when you can work, then employees tend to show more flexibility and loyalty themselves – especially if you pick the right employees! It can help build a can-do culture, rather than one in which employees don’t feel able to talk about what they need.

Reasons for hope

I like to think International Women’s Day is a chance to celebrate, too.

Last week’s Hampton Alexander Review showed that women now hold one in three board positions at FTSE 350 firms – just a decade ago, 43% had all-male executive committees.[5] In just five years, the number of women on FTSE 350 boards rose by 50% from 682 to 1,026. That’s impressive progress.

Happily, it helps if you’re committed to sustainable investing, too, because it’s only become mainstream very recently. Responsible Investment is unusually balanced when it comes to gender – its rise translates into women filling more senior roles in finance. Or, as one clickbaity headline put it last year, ‘Responsible Investment is a rare field of finance led by women. Now It’s hot – and men want in.’

All of which means I’m optimistic that change has started and it’s not done yet. And it’s why I think companies that fail to correct that imbalance quickly will ultimately underperform their competitors.

[1] https://www.mckinsey.com/featured-insights/future-of-work/covid-19-and-gender-equality-countering-the-regressive-effects

[2] Analysis was conducted of 496 US large-cap equity funds with combined assets of $2.3 trillion. See FT coverage at https://www.ft.com/content/021a1b60-a5fa-42ad-83b4-482268cac7ac

[3] Prospect Union: https://prospect.org.uk/article/what-is-the-gender-pension-gap/#:~:text=The%20gender%20pension%20gap%20is,gap%20that%20year%20(17.3%25).

[4] ‘The Gender Pay Gap – UK Parliament’: http://researchbriefings.files.parliament.uk/documents/SN07068/SN07068.pdf

[5] Hampton Alexander Report: https://ftsewomenleaders.com/