Can We Actually Close the Gender Pay Gap in Finance?

In light of International Women’s Day, we hear from Aoife Whitford, from The Pay Index who delves into the gender pay gap in finance.

The Gender Pay Gap remains an important topic in the fiance sector, and with International Women’s Day around the corner, we spoke to Aoife Whitford from The Pay Index who delves into whether the pay gap can actually be closed. 

Closing the gender pay gap is one of the biggest challenges facing the finance sector today. A recent report using Financial Conduct Authority[1] data showed that of the 9,957 partners at UK private equity firms, hedge funds and other financial services companies, just 1,381 (14%) of these are women. While we’re seeing a range of initiatives and campaigns designed to open up top finance roles for women – not least the government’s Women in Finance Charter – this figure has risen by just 2% over five years.

Finance is a complex sector and certainly, the specialist roles involved mean that talent retention and building an effective pipeline is challenging at best. What’s clear though, is we need more than government exercises to drive change: gender pay is not a female problem, it’s is everyone’s problem. But can we actually close the gap?

C-level state of play in finance

Unpacking the true state of play in gender diversity within the finance sector, we commissioned research across C-level positions within the top 100 companies in the FTSE, NYSE and NASDAQ, comparing this with our proprietary data.

We found:

  • Of the 300 positions of Chair, CEO and CFO, women make up a total of just 8.6%.
  • Within this, just 5.6% of the chair positions are held by women.
  • Women are paid an average 85% of men across all three exchanges.

With that in mind, we now, as an industry need to move closer to a meaningful solution.

A suggestion of progress for CFOs

Digging deeper into our findings, the research showed that just 6.6 % of CEO roles are currently held by women, with the position of CFO emerging as the most diversified with nearly 15% (14.7%). There’s a long, long way to go but it certainly indicates a degree of progress. At the same time, female CFOs are countering the prevailing pay gap trend, averaging a salary 132% more than their male peers.

We also found the FTSE100 to be the most diversified of the exchanges, with 9.7% of these senior roles occupied by women. Last year, RBS achieved an FTSE 100 first by appointing Alison Rose to CEO and Katie Murray as CFO.

Closing the pay gap requires proactive goal-setting and problem-solving to shift entrenched cultural, societal and attitudinal norms within finance, to harness any kind of meaningful change. For this to happen, we need to start with actionable solutions. This is where The Pay Index is seeing change happen:

Leaders must own gender diversity
In its Women in Finance Charter, the government recommends appointing a senior executive to own responsibility and accountability for gender diversity and inclusion. Organisations can go a step further by setting and publishing internal targets for senior management. This can be benchmarked in your annual report.

Align your gender diversity lead with your HR leadership team and recruitment partners – internal or external. Investing in bespoke initiatives designed to develop, grow and promote women within your organisation should be part of this. We’re seeing gender diversity enhancing employer brands, the outcome being improved recruitment and retention. Keep in mind, this needs to be grounded in an authentic commitment to change, rather than assigning this to a box-ticking exercise.

Gender pay is not a female problem, it’s is everyone’s problem.

Make sure role models are visible – everywhere

Finance is a sector still steeped in traditions of old boys’ clubs, golf days and while it’s being curtailed, trading floor “bants”. The barriers to entry are harder for women as there still aren’t the numbers there to support them.

Businesses need to ensure women have access to positive role models and mentors right across the organisation, supporting, encouraging and nurturing employees from the outset. We recommend that mentoring and promotion is zoned in on from middle management levels, with clear career roadmaps, training and professional development pathways set out for female leaders.

Open up your talent pool with flexibility
Opening up flexible working opportunities in finance is essential. For one thing, it means you can access a wider talent pool. Statistics show that 70% of UK employees say that flexible working makes a job more attractive and 30% would opt for flexible working over a pay rise. Four day weeks, working from home and co-sharing roles are all options here.

Retention, rather than recruitment, is a key challenge for finance. We need to understand the challenges facing female talent at each stage of the career lifecycle to address this. To date, graduate schemes tend to be split 50/50 between the genders, but these numbers decline as employees become more senior. Women reach a level of seniority at the same time as their personal and family commitments increase. But the lack of flexibility makes returning to work – at the same level or in a newly promoted position– incredibly challenging, which is why we need genuinely flexible strategies in place to enable this. Atom Bank is a brilliant case study of a bank creating authentic flexible working programmes and setting itself apart as an attractive family-friendly employer.

Closing the pay gap requires proactive goal-setting and problem-solving to shift entrenched cultural, societal and attitudinal norms within finance, to harness any kind of meaningful change.

Powering retention with flexible working
By creating more flexible opportunities, businesses can significantly improve their retention rates. The CIPD found that 75% of employers say that flexible working has affected retention positively. Exploring Return to Work programmes is another opportunity for future-focused employers, welcoming team members back after an extended career break. Returners build on the skills and experiences previously gained in their careers then complement these with training, mentoring and coaching, as they transition back into the world of work. This untapped resource can prove invaluable, not least as brand ambassadors and role models.

Change requires collaboration

We can’t close the pay gap alone. Challenger banks like Starling, founded and led by Anne Boden, and Atom Bank have been early adopters of collaboration, leading the charge on gender diversity. At the same time, fintechs such as Monzo and Tide have completely embraced new narratives for senior women, building positive, diverse and inclusive cultures from the ground up.

Nurture links and partnerships with like-minded organisations, breakdown barriers and shape cultures that not only attract senior women into but allows them to thrive in. If you have a team with eight men, and a single woman, it’s going to be hard for her to fit in. Think about what makes your female leaders tick – values, relationships, purpose – and make sure this runs through every pillar of your organisation.

We need to go way beyond knowing the statistics and ticking boxes to close the pay gap in the modern financial workplace. We know that gender-diverse companies are 15% more likely to deliver financial returns[2] above the industry average. Organisations failing to prioritise gender equality, building teams rich in a diversity of background, experience and creativity, are effectively creating another way to be left behind. And it’s this that I believe, will ultimately drive the foundational change needed to close the gender pay gap.

 

[1] https://www.theguardian.com/society/2018/sep/03/women-tiny-minority-financial-services-firm-partners

[2] https://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters

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