Putting a Dent in the Glass Ceiling: Quotas, Biology and The Financial Sector

August 23, 2018
Editor(s): Neala Guo
Writer(s): Nicholas Bea, Huishan Feng, Shreya Sharma

The Need For Quotas

One of Japan’s most prestigious medical schools, Tokyo Medical University, has recently admitted to deliberately altering entrance exam scores of female applicants, a practice that has continued for over a decade. This was done to restrict the number of female students, whom the university anticipated would have shorter careers due to wanting to rear children. 

As readers, we might want to believe that this level of institutional sexism is uncommon and localised. But the thinly-veiled sexism flaunted by Tokyo Medical University isn’t a standalone event. Rather, behaviours that devalue women within the medical profession are part of a larger shared cultural concern, and the dismissive attitude Tokyo University exhibits towards female students can be seen in many industries. 

Women continue to be woefully under-represented in most senior roles all around the world. The issue is complex, and biases and barriers operate at multiple levels. Countless solutions have been proposed to battle gender inequality and gender quotas have emerged as one of the most common and controversial instruments used in politics and business. 

There are three widely-expressed arguments against gender quotas. First, they offend our sense of meritocracy (that is, if you see our society as meritocratic in the first place). Second, that women won’t be taken seriously  in places where gender quotas are used. Third, it might not actually have the desired effect, since quotas have sometimes increased the number of females in non-executive roles, but not executive directorships, a phenomena observed in the financial sector. 

Quotas in the financial sector 

Although gender quotas are slowly but surely being introduced to mid-to-large scale companies today, female directors make up only a meagre 25.4% of management teams, this can be compared to the 25.3% in 2016.

Although women face an addition set of challenges vis-à-vis gender discrimination and prejudice, management opportunities are seldom distributed to women as compared to men, especially in the fields of finance and banking.

The majority of companies in banking, assurance, professional services and asset management maintain a 20-35% of women in senior roles. This is especially peculiar given most of the banking roles employ more women than men company-wide.

(Citi Bank however is the closest to achieving gender equality, with just less than 45% of the management board being women.)

The resulting conclusion from the findings is both simple yet discouraging: although women outnumber men in most financial services organizations, not a single company achieves gender equality in senior roles.

The field of investment banking is notoriously perceived to be riddled with gender discrimination, however Goldman Sachs is making strides towards achieving equality without the implementation of quotas through its investment in female mentor-mentee relationships, as well as leadership training programs for high-potential female bankers.  

Perhaps other financial service companies should follow the lead of Goldman, the blind implementation of quotas often leads to promoting women too early into the workplace, leading them to failing, as Mark Carney, the governor of the Bank of England said: “Results have fallen short of good intentions.”

Biology versus societal conditioning 

While discrimination against women is illegal, there are still socially accepted gender roles that have produced stereotypical occupations for particular genders. Activists continue to challenge these norms in an effort to give opportunity to females in male-dominated industries, and vise-versa.

Quotas may be an excellent solution to gender discrimination, given that it bypasses the possibility of a sexist interviewer, however, one has to take into consideration all factors that contribute to gender inequality in certain industries, which also may include biological differences.

Although there is little doubt that societal conditioning is majorly responsible for individuals’ occupational choices, much originates from biological roots. In particular, the concept of ‘brainsex’ argues that the two sexes differ in brain structure and organisation. This results in different abilities, interests, levels of aggression, motives, and emotional characteristics.

One study of over 500 MBA students demonstrated the biological influence on occupational choice. It was found that individuals high in testosterone and low in risk aversion were more likely to choose risky careers in finance. As women are, on average, more risk-averse and have lower levels of testosterone compared to men, this may impact females’ confidence to apply and maintain a career in the financial services industries.

Females are also less likely to pursue science, technology, engineering, and mathematics (STEM) careers than men. This under representation could be attributed to their lack in necessary mathematical competencies. However, females are more likely to outperform males in verbal ability, a strength unique to the feminine brain, which sometimes influences women to choose an equally intellectually challenging but less maths-intensive major at University, despite having outstanding aptitude in both maths and verbal ability. The lack of awareness surrounding the verbal skills needed in the financial services industries, especially in advisory and management, may also contribute to females sourcing alternative career opportunities. 

Another biological factor is women’s investment in their offspring. Many value relationships over competition and often choose their occupation based on how it fits around their family life, rather than the other way round. For example, investment banking, with its reputation for 17 hour work days and little flexibility, is not a family-friendly career. On the other hand, men have been biologically rewarded with physical strength and, furthermore, value status acquisition, traits compatible with the demands of investment banking. This creates a divide between the sexes in their drive to become successful in this industry, where success often requires complete commitment to one’s job and the sacrifice of dedication to family. 

Do Quotas Work? 

As the call for the number of women on company boards continues to rise with the possibility of gender quotas being administered, Australia has ascended to the exemplar position of having women hold 30.7% of board seats in ASX 100 companies. However, a Mercer study has shown this figure is not enough in achieving what could be potentially more expansive and impressive economic results. With only 11% of women holding fund manager positions, leading to the conclusion that less women enter the industry and more women leave, those mis-represented companies are forfeiting a 3.7% higher compound return that comes with public companies having no women serving on their boards as compared to those companies that share their board equally with men and women. Additionally, the study indicates a higher return on equity of 41% for companies with top-quartile diversity than those without. Most likely, this arises out of the ability of women to serve as efficient long-term stewards of capital as a result of limiting trading costs and circumventing portfolio churn. That being said, the economic viability of having more women on corporate boards seems apparent, and coupled with the objective and strategic mindset of women, as according to the director of the Australian Shareholders Association Stephen Mayne, the necessary balance that is imperative for corporate financial governance comes about through the natural ability of female leaders. Not driven by their egos to dominate opponents during corporate raids like their male counterparts, female board members act sensibly with the goal of long-term sustained growth at the forefront of their mind. Nevertheless, the notion of meritocracy, a political philosophy that stresses the importance of natural traits, talent and effort over sexuality, race or gender in acting as the determinant for positions of economic power or status has been raised in objecting against the implementation of gender quotas. The danger arises when individuals are being hired or appointments merely as tokens to improve the look of the company. Except, this issue could be avoided if women were encouraged from the beginning of their education to pursue such careers. If there were a group of young, eager and qualified women available for selection to positions in the financial sector, the argument for meritocracy would disappear and the necessity of the gender quota along with it.

The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.

Meet our authors:

Neala Guo

Nicholas Bea
Huishan Feng

Shreya Sharma