Practical analysis for investment professionals
24 August 2015

Financial Services Leadership: Demographics and the Glass Ceiling

Financial Services Leadership: Demographics and the Glass Ceiling

On 18–19 September, CFA Institute will host Alpha and Gender Diversity 2017 in Toronto, the latest in its series of Women in Investment Management events. Attendees will have opportunities to discuss gender diversity, foster professional development, and meet their peers from other regions in North America.

Barbara Roberts describes herself as “an everyday revolutionary,” but her life’s work has been anything but routine.

As a leading-edge baby boomer, Roberts organized her first “sit-in” in second grade when the school would not let girls carry the US flag. She won that battle and has been carrying the flag for women and diversity ever since. As Roberts said, “My lifelong passion has been to help women gain their share of the economic and political pie.”

She spent 15 years on Wall Street holding a number of senior roles, including her last position as the first woman on Dean Witter’s board of directors. When she left Wall Street, the Wall Street Journal wrote an article about her departure and coined the term “the glass ceiling.” From Wall Street, she transitioned to her true passions: entrepreneurship and leadership. She went on to restructure, lead, and sell several companies. Today, she spends her time speaking, teaching at the Eugene Lang Entrepreneurship Center at Columbia Business School, and coaching members of Tiger 21 — the peer-to-peer learning group for entrepreneurs with a minimum of $10 million to invest.

In her talk, “Inspiration and Aspiration: Leadership and Entrepreneurship in Investment Management,” at the recent Women in Investment Management Conference, Roberts examined how far women in finance have come in the last 50 years and presented some surprising research about where things may be heading today. In particular, she focused on demographic changes, the ongoing pay gap, and the blossoming influence of millennials.

The Times They Are a-Changin’

Roberts said favorable demographics and relationships through women’s networks were the keys to her success throughout her career. Demographics opened doors for her and other women on Wall Street in the 1960s when there was a dearth of male labor due to the draft for the Vietnam War. In addition, laws were passed in the United States in 1963 and 1964 that forbade discrimination and sought to give women and minorities equal opportunities and equal pay for equal work.

Today, Roberts is once again excited about the opportunities presented by demographic trends. Baby boomers who have clogged the pipeline for management positions since the 1960s are now moving out, creating more opportunities for women and a more diverse talent pool at the top of corporations and on boards.

Gender Pay Differentials

Roberts investigated gender pay differentials, however, and was surprised to find that despite the demographic changes, some ground has been lost since the financial crisis. She said the gender gap in pay was the smallest ever in 2007 (for all jobs), with women earning 82 cents on the dollar compared to men. Now it is back to 80 cents on the dollar and has stalled. Roberts is most concerned that the financial services sector has one of the worst pay gaps, with women financial advisers, traders, and other specialists earning closer to 73 cents on the dollar. What is holding women back? Roberts turned to Harvard labor economist Claudia Goldin for some answers.

“Goldin does not emphasize leaning in, involving men in house work, or improving women’s confidence and negotiating skills, but rather says that flexibility is the trick in terms of work hours and work location,” said Roberts. “Financial services companies have always required employees to give a lot of face time and work during trading hours.”

In her recent paper “A Grand Gender Convergence: Its Last Chapter,” Goldin reports that “occupations that value long hours, face time in the office and being on call tend to have the widest pay gaps.” What is needed, Goldin says, are “changes in the labor market, in particular how jobs are structured and remunerated to enhance temporal flexibility. The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours.” Goldin says considerable change has occurred in a number of sectors — health, science, and tech, among them — but the financial, corporate, and legal realms seem to be more resistant.

In addition, Roberts encouraged the audience to examine their own pay. “When was the last time you looked at pay?” she asked. From her experiences running companies, she observed that men are more aggressive than women in asking for more money. She also suggested seeking out help from human resources departments to determine whether pay is fair for you and for your employees.

The Millennials Are Coming!

Roberts researched why more women have not made it to the C-suite and board seats over the decades and found one intriguing survey that showed the vast majority of baby boomer women never really wanted to be in management positions. In a 2013 study by the Pew Research Center, only 21% of baby boomer women (ages 49 to 67) versus 32% of the men actually wanted to be the boss. “If you look at the percentage of women at the top today, it’s really not that bad in context,” Roberts said. On the other hand, 61% of millennial women (ages 18 to 32) versus 70% of the men said they wanted to be a boss someday. More millennials want to be in management and trends are in place to help them get there.

For example, in 2010 the Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into law and it states that all US Federal agencies and the US Federal Reserve must take major steps to improve opportunities for women and minorities. “This is a requirement,” said Roberts.

With regard to corporate boards, “the percentage of women has been stuck in the teens for some time in North America,” said Roberts. Europe is moving forward, however. “The EU started with only 12% corporate boards in 2012, but they have a goal of 40% women on boards by 2020.” How are they getting there? Two main ways: 1) Companies must present female candidates for every opening and 2) term limits. “In the United States, the lack of term limits has limited progress,” said Roberts. “It is the board’s choice to have term limits and less than 10% of large boards have this policy. Women are doing very well when seats open, but they are not opening fast enough at US corporations.” Roberts said that this is a key initiative that we’re missing in the United States and we should talk to regulators and advocate for change.

Breaking the Glass Ceiling

Roberts offered other career management advice to women based on her research and personal experience.

  1. Childcare: The positive news is that there is more on-premise childcare. So celebrate it and lobby for federal pre-school programs. Child-free single women in urban areas still make 8% more in salary. Apparently millennials are the most organized in this regard and a recent US Trust survey found that in 25% of millennial men describe themselves as the main caretaker of the children in their household.
  2. Network, Network, Network: Roberts attributes her lifelong successes to her network of women, particularly the Financial Women’s Association (FWA) of New York and a close group of peers with whom she has met once a month for 22 years. Roberts’s advice is to build networks of people (women and men) who could be your advisers or sponsors to help you move your career forward.
  3. Big Data: Roberts believes in sharing stats with colleagues about the benefits of diversity in business and the positive outcome it can have for companies. “It is really important to get the message out and raise our visibility,” she said.
  4. Fight the Need to Be Perfect: “Women have a need to be perfect that’s holding us back,” Roberts said. Men apply for jobs two years too early and women apply for jobs two years too late. There are strategies that can help you at your next position even if you feel you’re not 100% qualified. Roberts’s advice is to take the first 60–90 days in a new job to just listen to the people on your team to come up with strategies.
  5. Handling Failure: Roberts says entrepreneurs like herself are eternal optimists and the best times of life are often when something goes awry in a business. When she ran her own businesses she asked her team to present problems as opportunities — no matter what!
  6. Use Your Natural Talents: “The demographics are in our favor and the time is now for brains over brawn,” Roberts noted. She pointed out that women can tap their natural talents to lead diverse teams and manage change. “And our brains are better at seeing and feeling,” she said. “It’s our secret weapon.”

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: W. Scott Mitchell

About the Author(s)
Julie Hammond, CFA

Julia Hammond, CFA, is a director in the Educational Events and Programs group at CFA Institute, where she leads the planning for a number of annual and specialty conferences, including the Fixed-Income Management Conference, the Equity Research and Valuation Conference, the Latin America Investment Conference, the Alpha and Gender Diversity Conference, and the Seminar for Global Investors, formerly known as the Financial Analysts Seminar. Previously, she developed strategies for pension, endowment, and foundation fund clients at Equitable Capital Management (now AllianceBernstein), and she has also worked as an auditor for Coopers & Lybrand (now PricewaterhouseCoopers). Hammond served for a number of years as chair of the investment committee for the Rockbridge Regional Library Foundation. She holds a BS in accounting from the McIntire School of Commerce and an MBA from the Darden School at the University of Virginia.

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