Why the Finance Industry’s Diversity Efforts Have Failed

Why the Finance Industry’s Diversity Efforts Have Failed

(Bloomberg Markets) — Decades of initiatives to increase diversity within the finance industry have produced limited results. None of the major U.S. banks have ever had a woman chief executive officer. Women and people of color are still underrepresented throughout the asset management industry. So we went around the world asking for advice on what needs to be done.

Read More: Data Show Black Men and Women Are Underrepresented in FinanceMonica Hsiao FounderTriada Capital Ltd. in Hong KongThere’s still a boys-club mentality and network that’s alive and well, even today. This doesn’t stop women from advancing, but there’s no natural propellant to enable women to compete on the same footing either.

This isn’t an issue of men vs. women, though. It’s just that we should have a cultural change in viewing some fields as naturally more male- or female-dominant, and both men and women should be more aware of the biases/perception they may hold when interacting with each other. This may seep into their dealings and comfort in forming connections, and that, in turn, can affect the atmosphere of a workplace.

This similarly goes for racial differences. In some cases you see promotion of more women and minority representation on corporate boards, for example. I do think we need more role models to break through the glass ceiling to start changing some perceptions. The industry has talked about earmarking funds to go to women- and minority-led funds in the U.S., for example, but we haven’t seen enough evidence of the flows really going that direction to make much difference.Jane GoodlandCorporate Affairs DirectorQuilter Plc in LondonIt is too early to say the finance industry has failed on diversity. There are many indicators that the sector is moving in the right direction. However, the pace of change needs to accelerate. Covid-19 could be a stimulus to expedite that change. Mindsets are shifting, with diversity being seen as contributing to strong and resilient businesses rather than being a problem that needs to be fixed.

There are clear signs that the Covid-19 crisis, over the longer term, will help to accelerate a move to a flexible working culture in the finance sector. As a sector known historically for its long-hours culture—with only 7{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of employees working part time, compared to a U.K. average of 28{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}—that would be a necessary and welcome reset. [It would] enable everyone to have more choice and flexibility over their work, which means greater equality both at work and home for both men and women. It’s vital that firms adapt. Otherwise, they’ll fail to attract and retain the most talented people.

Cynthia DiBartoloChief Executive OfficerTigress Financial Partners In New YorkUnless you tie compensation to these initiatives, you’re never going to see it change. Unless you change the compensation, it ain’t happening. Compensation drives behavior; behavior drives performance.

I don’t think that it should be about shaming if the numbers are low. I think it should be about collectively coming together to change the numbers. If you don’t diagnose that you’re sick, you’re never going to get well. The numbers, while they may not be pretty, give you an opportunity to fix what’s broken.

[C-suite executives need to take the lead.] They’ve been playing this game that they punt back and forth with no ownership.

David MathersChief Financial OfficerCredit Suisse Group AG in ZurichHaving access to reliable data and insights enables us to concentrate our efforts in the right places. We can make effective change and support our employees regardless of their identity—race, gender, age, religion, sexual orientation, and so on—to progress to senior roles. We can remove potential confirmation bias from our processes—such as recruitment and performance management, compensation decision-making, leadership development, and promotions—and use targets to measure progress. Without targeted action, we cannot change the profile of our workforce or improve diversity statistics.

Paul SmithFormer Global CEO and PresidentCFA InstituteDespite the best of intentions, there’s little evidence that diversity is improving in the industry. I firmly believe that businesses need to set formal quotas by gender and by ethnicity if we are to change hiring practices that today clearly entrench academic and social biases—unconscious or conscious.

Diversity doesn’t work in finance primarily because recruitment policies are geared toward hiring young people from a small, select group of schools. These schools tend to draw their students from an equally predictable pool. Finance needs to be more deliberate in reaching out beyond its traditional hunting grounds.

Luke EllisCEOMan Group Plc in LondonI don’t think it’s fair to say the finance industry’s diversity efforts have failed, but I do think it’s fair to say that there is a long way to go until we can view them as a success. The reality is that the industry was on the wrong side of progress for a long time—30 years ago, much of the industry was openly sexist, homophobic, and racist. This left a huge hole in the pipeline of diverse talent as quality people were either put off by the industry and never joined, or rightly left the industry after short period because of the how they were treated and a lack of recourse.

As an industry, we have to keep doing a better job at getting the message out to young people that this is now an industry where you will be treated with respect and promoted on merit, and of course it is an industry that provides constant intellectual stimulation and opportunity for impact both personally and socially, and so is a great place to build a rewarding career. It is impossible to shortcut a solution to this historic gap, but we can all focus on building and developing the future pipeline, something that we take very seriously at Man Group. Progress is gradual, but as long as we keep taking steps in the direction of greater diversity at all levels of the industry then we will succeed.

Dennis MitchellCEOStarlight Capital in TorontoMy own experience in the wealth and asset management industries is that a lot of the recruiting is done either through personal networks—so you’re delving back into where you went to school or your alumni network—and/or you hear that age-old adage, “We only recruit from the best schools.”

Lauren Cochran Managing DirectorBlue Haven Initiative in WashingtonThe industry echo chamber focuses on the question, “Did we make more money than last year?”—confirming the system in a vicious cycle even as traditional banking businesses are less and less lucrative. When bonuses become dependent on the question, “Are you making money and have you taken advantage of the skills that come with hiring a group of people that don’t all think alike and have different worldviews?” then things will change, and people will probably make more money. There’s a mountain of data to back that up.

Peter HarrisonGroup Chief Executive OfficerSchroders Plc in LondonI am a firm believer in the importance of data and analytics to improve our decision-making, and in the last 12 months we have campaigned for our people to tell us more about themselves and complete their diversity profiles. It is only with this data that we are able to direct our resources to make the changes with the biggest impact.

Our decision, several years ago now, for Schroders to communicate our gender pay gap—ahead of statutory requirements—reflected my belief that data transparency is key to driving real change. With progress on diversity metrics linked to pay outcomes for senior management, we are holding our people accountable for addressing this role representation gap, as well as diversity and inclusion more broadly.

Wes HallExecutive Chairman and FounderKingsdale Advisors in Toronto (Hall Founded The Canadian Council of Business Leaders Against Anti-Black Systemic Racism)Companies, for example, say, “I am going to put a diversity policy in place.” And they put a woman in that position, and that’s great. But I’m a Black man, and my civil rights were violated, and I’m coming to work in the morning. How would she understand my problem and what happened to me and the psychological trauma that I went through as a result of that experience as a Black man? So wouldn’t it be nice to have another person within that organization that shares the same role that I can now go to and talk to and can counsel me because I just experienced a trauma?

We have people who are putting things in place that don’t understand me. And they think they do by putting these systems in place. If we’re there, then when they are making policies we can say, “No, that doesn’t apply.”

Bhavini “Bev” ShahFounder and CEOCity Hive Network in LondonThe chief risk officer should be having sleepless nights over the lack of diversity. Boards who take representative and cognitive diversity seriously have recognized that it brings results in performance and decision-making, as well as having a positive impact on brand and revenue. The solution lies in not picking one diverse group to focus on but investing in real solutions to help build a diverse industry where everyone can thrive regardless of race, gender, sexuality, or anything else. Only then will we truly have the best talent.

Chie ToriumiSenior Managing DirectorNomura Holdings Inc. in TokyoUntil now, if a man said he wanted to work from home, others would tell him, `What are you talking about?’ But it will gradually become a norm, and so home chores will be shared. I don’t think we’re there yet. I often ask our male employees who are working from home, `That’s all well and good but are you doing the housework?’ Things will gradually change, and the number of women leaving the workforce will likely fall.Rachel LordHead of Europe, Middle East, AfricaBlackRock Inc. in LondonAs the head of the largest asset manager in EMEA I am extremely proud of the progress we have made on gender diversity over the last few years—for example, today over 40{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of my Executive Committee are female. Nevertheless, it is clear that both BlackRock, and our industry more broadly, need to make further progress on gender, race, disability, sexual orientation and other forms of diversity, at all levels of the organization. We need to help dismantle the structural impediments to opportunity and advancement faced by anyone who doesn’t look like the ‘norm.’ I believe that if we can collectively focus our energy on overcoming the challenges posed by a lack of data, the need for more ambitious targets, and an overall lack of accountability, the rewards are potentially huge—making our businesses more competitive and more sustainable over the long term.Adam FarkasCEOThe Association for Financial Markets in EuropeWe can’t increase diversity with a single decision. We need to make efforts over time using holistic approaches—training and recruitment all the way to addressing compensation. The initiative to have shorter stock exchange trading hours is an example, if accepted, that would allow for more diversity in parts of finance. It shows the industry wants to change. Further efforts are needed to speed up increased diversity and over time they will result in positive outcomes.Kewsong LeeCo-CEOCarlyle Group LP in New YorkAchieving more meaningful progress in our industry will require firms to commit to improving their culture over the long-term in a comprehensive and sustained fashion. It’s more than just setting the right “tone at the top.”  It requires multiple actions that are holistic, sustained for many years and utilize all spheres of influence. It will also require embracing diversity of thought and inclusive behavior in everything we do. And finally, it will require listening, action and taking accountability.Karis StanderManaging DirectorInvestment 20/20 in LondonMost young people have never heard of the brands in the industry, so you need to get out to schools and inspire them. It is so important to have people from different backgrounds, different lifestyles, because diversity of opinions and experience is the life blood of our industry. That means we have got to get a critical pool of diverse people and promote and develop them so we don’t turn around and say there is nobody there.Karolina NoculakInvestment DirectorAberdeen Standard Investments  in EdinburghChair of the CFA U.K. D&I Network — ScotlandRetention of diverse talent and career progression remain key issues. Long-hour culture and office presence created tangible barriers to female progression as women are typically primary carers. Flexible working, remote access and clear progression paths based on outcomes (rather than office presence) are necessary to level the playfield. If there is a silver lining to the current lockdown, we should note that some tangible barriers to female progression have just been lifted.

Contributions from Divya Balji in Toronto, Marion Halftermeyer in Zurich, Bei Hu in Hong Kong, Lananh Nguyen in New York, Heather Perlberg in Washington, Takashi Nakamichi and Takako Taniguchi in Tokyo, and Nishant Kumar, Benjamin Robertson, Viren Vaghela, and Suzy Waite in London

(Adds Man Group CEO Luke Ellis’s extended comments.)

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