Men alone should no longer run finance

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Ana Botín has wasted little time since becoming chairman of Banco Santander in September, last week appointing a new chief executive. Like Abigail Johnson, installed as chief executive of Fidelity in October, she worked hard for her job, but it is inescapable that both are members of founding families. For women lacking a birthright, the route to the top in financial services is tough. At the top 150 banks and financial services groups, just six chief executives are women; and only 13 per cent of the members of their executive committees are female. Although banks have tried to remedy some of the causes, men still rule the financial world.

When I was younger, I assumed that it would change. I was a child of the 1960s, a teenager of the 1970s and a graduate of the 1980s. My generation, even if it had prejudices and did not always fulfil its ideals, grew up amid feminism. Few argued publicly that men should be in charge of the workplace and that women should stay at home. The results of this generational experiment are now in and they are pathetic. There has been some progress but it is glacial at the top. A study published this week by Oliver Wyman, a consultancy, finds that the proportion of women on executive committees of big financial institutions rose by only 3 percentage points between 2003 and 2013.

At this rate, women should achieve executive parity in about 120 years — a third of the way into the 22nd century. Last week, I went to a lunch hosted by a bank in the City of London, attended by a crowd of senior financial and business executives. It was a pleasant event but, in terms of the gender balance, it could have been 1970. The senior management committee of Goldman Sachs includes five women out of 34 members. There are two women out of 16 on Morgan Stanley’s operating committee, including Ruth Porat, chief financial officer. Two women sit on Deutsche Bank’s 21-member executive committee. Barclays is an outperformer among global banks, with three women out of 11.

Financial institutions do better at board level, where the proportion of women has risen from 12 per cent in 2003 to 20 per cent in 2013. Barclays has already met its target of having a 20 per cent female board, and needs only to swap a woman for a man on a 14-member board to meet its target of 25 per cent by the end of 2015. While this is creditable, it also shows the problem. It is simple to call a headhunter and ask for a shortlist of potential non-executives that includes women. The barrier is higher when institutions choose among the bankers, asset managers and traders seeking promotion. They tend to choose men to run revenue-producing businesses and a few women to oversee human resources and technology.

Banking and finance should be a relatively equitable industry — it does not involve lifting heavy objects, and the performance targets are fairly transparent. The degree to which it used to be a men’s club should have been curbed by financial deregulation and open competition. Yet, although many women join banks as associates and analysts, they find it more difficult to win promotion than in other industries. Something is so wrong that it provokes some to suggest that banks should instead place women in charge, since female hegemony would be an improvement on male domination.

Christine Lagarde, International Monetary Fund managing director, is among those to express the “Lehman Sisters” view that banks got into trouble in the 2008 crisis partly because men are inherently risk-seeking. “I do believe that women have different ways of taking risks, of addressing issues … of ruminating a bit more before they jump to conclusions,” she told US National Public Radio. I think the results, particularly on the trading floor … would be different.”

Men have indeed shown higher risk appetite than women in psychological experiments, but using that to argue for female hegemony strikes me as dubious and dangerous. (Ms Lagarde says she seeks only greater diversity.) It is dubious because women bankers choose to enter a risk-intensive industry. Those who make it to the top are even less likely to conform to the average. Zoe Cruz, head of fixed income at Morgan Stanley until 2007, was known for her belief in risk-taking.

It is dangerous because an overemphasis on innate gender characteristics can lead to strange conclusions. One study found that men take greater risks in the company of women because they show off — it is a form of mating ritual. Does that prove that banks should clear trading floors of women? It is also unnecessary. There is no need to place the burden of proof to women to demonstrate their worth. Male domination clearly weakens decision-making by curbing the diversity of opinion. It limits the talent pool and pushes women out of the industry at all levels, even ignoring the sexual harassment uncovered in this week’s FTfm survey of asset managers.

Finance was never a balanced business. Nor is it simple to solve the challenges, for example, of bringing women back into managerial jobs after career breaks to raise children, or of changing the trading floor culture. But we should not stop noticing how strange it looks and how foolish it is.

John Gapper
Financial Times
3/12/2014

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