Reconciling the gender gap in finance

The job of the finance function in any firm is to ensure that everything adds up. Reconciliation is therefore a fundamental activity in attaining this desired goal. It achieves this by spotting outliers, ensuring data integrity, and putting firms on the path to having zero variance between their accounts. In other words, it makes sure that everything is even.

Whilst the desire for balance is ingrained in the financial industry when it comes to monetary terms, the same can’t also always be said for when it comes to gender. Despite progress having been made, it is no secret that a gender gap between men and women persists in the financial sector. For International Women’s Day 2024, we will therefore place a spotlight on the imbalances which continue to persist between these two genders in the hope that soon there will be no exception to equality.

Wages

The term ‘gender gap’ is synonymous with salaries. Despite this being the case, a gap between the take-home pay of men and women continues to persist, even within the sector which has the strongest handle on finances.

In fact, the top five gender pay gaps by sector are all within Financial Services. This isn’t by a small margin – the UK average gender pay gap in 2020 was 12.1% but in the Financial Services market, it stood at 26.6%. Since then, instead of making progress to reduce this gap, in 2022 the likes of HSBC, Goldman Sachs, Morgan Stanley, and Standard Chartered all reported a widening difference between what they paid their male employees compared to their female counterparts. Out of these firms, the British arm of Goldman Sachs scored the worst, recording a pay gap of 53.2%.

Considering that the financial industry is founded upon the mission to secure assets, empower through them, or increase their value, it is a great shame that it apparently does not apply these beliefs equally to the women who work within the sector.

CFO and leadership representation

A common defence by financial firms as to why their pay gap is so wide, is that they have under-representation of women in senior roles. This is true because only 13% of firms have a female CFO; however, it doesn’t explain why this is the case.

With finance and accounting functions employing a nearly even split of men and women (52% and 48% respectively), similar numbers should be represented at all career levels. The fact that this isn’t the case and that research by UWE Bristol concluded that “female accountants should be very well-placed to be promoted to senior positions [...] however, we found that the pipeline of talent is being restricted by a range of structural and organisational barriers”, unfortunately points to systemic bias against female career progression within the financial sector.

This becomes even more likely and difficult to comprehend considering that in 2019, firms with female CFOs were more profitable and that diversity at the C-level is repeatedly proven to offer a host of benefits for firms such as building a more resilient firm and generating greater innovation revenue. Infringing upon female development in financial careers is therefore damaging not just to them but also firms and society as a whole.

Furthermore, considering that 70-80 percent of all consumer purchasing is driven by women, firms are evidently missing out on a significant amount of financial nous by not enabling women to rise to the top. If this is to change, discrimination must end because 50% of women would refuse jobs at firms without DEI values that match theirs, a core one being the presence of “visible role models” in leadership teams. Simply put, without female financial leaders, women will not aspire to these role and feel confident in assuming them, nor will they ever have the chance to deliver the positives they can bring to businesses.

The next generation

Despite sex-aggregated data repeatedly showing that earnings are uneven in the financial sector and that there are barriers to career development, this does not appear to be resulting in decreasing numbers of female financial professionals. In fact, the opposite is true.

Over half of entry-level finance workers in the USA are female, 41.5% of students enlisted on London Business School’s Masters in Financial Analysis programme are female (an increase of a third in just six years), and compared to in 1970 when only 30% of finance degrees were awarded to women, in 2017 the figure amounted to almost 50%. Whilst all of these numbers are incredibly positive to hear, as shown above, equal numbers of representation at entry level roles does not necessarily translate into equality in other areas.

The question therefore becomes, will this next generation of women in finance be failed too? Will, 77% of mothers report a negative or possibly discriminatory experience during pregnancy, maternity leave and/or on their return from maternity leave, discouraging them to continue in the financial sector? Will 45% of employees continue to feel that their executive leadership team is not committed to DEI? Will 17% of female financial professionals continue to be unsupported by their manager?  

In 2019, the Financial Conduct Authority (FCA) predicted that it will be 88 years until the banking and finance sector achieved gender equality. Let’s hope they’re wrong. Our population has always been a near 50/50 split between men and women, and the same is true when it comes to the demographic of financial workers. It’s time for everything to reconcile and add up.