The Boy’s Club: Discussing Gender Disparity In The Financial Industry

  • The efforts that the industry has made to include female representation are very visible, but they do not appear to be enough
  • The number of females in top positions have contracted over the past year and there is a persistent pay gap
  • Women are underrepresented as fund managers, despite equal performance
  • Thought leadership is the most important asset a company can invest in, and the value stems from having diverse perspectives

 

Over ten years ago in regards to the Great Financial Crisis, Christine Lagarde, the current managing director and Chairwoman of the International Monetary Fund said that “if it had been Lehman Sisters rather than Lehman Brothers, the world might well look a lot different today“. Her reasoning was the following:

 

 

 

“Greater diversity always sharpens thinking, reducing the potential for groupthink… This very diversity also leads to more prudence, and less of the reckless decision-making that provoked the crisis.”

 

Gender equality has been a debate for decades, and the efforts are strong to increase female representation. Many of the processes that companies are enacting appear to be transparent and understandable, but there is still a lack of balance due to perceived gender disparity and the idea of a “boy’s club” perpetuating the system. There have been massive improvements over the years and visible effort from firms, but there is still low female representation in the C-suite, as fund managers, and the persistence of a pay gap, despite relatively equal skill sets and similar performance numbers.

 

Making Strides: The Increase in Female Labor Force Participation

 

The progress in increasing labor force participation among women has been substantial over the past several years. However, disparity still exists. The IMF released a study in of October 2018 that focused on the economic gains that come from gender inclusion. In 2014, female labor force participation (FLFP) was 54% among OECD countries, 49% in middle income countries, and 64% in low income countries. All of the statistics trailed behind that of the male labor force participation (MLFP).

 

country

 

Source: IMF

 

When focusing on the OECD level, there can be several reasons for this participation mismatch, ranging from family responsibilities to inherent bias. Focusing on reducing the gap between FLFP and MLFP, and continuing to bring females into the workforce will help with further enhancing the impact that diversity has on economic gains.

 

 

eng-nov-14-gendergains-2Source: IMF Blog

 

There are productivity and growth opportunities to be realized from diversity, with the IMF determining that there are significant output gains across all country types. The bottom half of countries could potentially see a 35% increase in GDP, simply by closing the gender gap. Most of the gains come from adding more workers, but 20% of the gains are a reflection of how productivity is influenced by gender diversity.

 

Talk vs. Act: Everyone Knows Gender Diversity is Important

 

Even as female labor force participation grows, female representation in the financial industry has been notoriously low, due to several variables, such as the glass ceiling and the stigma of a lack of work-life balance in the field. A lot of the bias is unconscious too, as there can be a trap of “this is how it’s always been“. The “boy’s club” reveals our human biases, as it is simply the practice of surrounding oneself with those who share similar characteristics. It is entirely within our nature to promote someone who is familiar to us, and if the industry is dominated by Caucasian males, it is human nature for them to hire more Caucasian males.

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Disclaimer: These views are not investment advice, and should not be interpreted as such. These views are my own, and do not represent my employer. Trading has risk. Big risk. Make sure that you can ...

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