Corporate leaders, shareholders slow to shed their ancient biases

When Alison Rose was appointed CEO-in-waiting of Royal Bank of Scotland in September, the British business press went wild. Well, as wild as the British business press gets.

15 November 2019

“Rose will be the first woman to lead one of Britain’s biggest banks.” “The first major British lender to appoint a woman to its top job”. “A watershed moment for women.” “Appointment gives Britain a chance to take a great leap forward for women.”

Of course, Australia only had to wait until 2002 to have a woman, Gail Kelly, run a second-tier bank, St George. Then she took over as boss of Westpac in 2008, 191 years after the first bank in the country started. That was the Bank of NSW, which morphed into Westpac.

Things do move at a glacial pace when it comes to women but is that because boards and governments need proof that gender diversity improves performance or that companies are ticking the box by putting women in functional roles rather than line positions? A Chief Executive Women study this year showed “more than half of the ASX 200 still have no women in line roles on their executive leadership team”.

While it took almost 200 years to get a woman to the top of a top bank (and now we have two), it was only a year till we became the first country in the world to give most women the right to vote and the right to stand for the federal parliament. But then it took 41 years for women to get a seat. Well, two seats to be exact. (Yes, New Zealand was the first to give women the vote, but not the right to stand.) Things were slower back in the old country. In 1918, women over 30 who were householders, the wives of householders, occupiers of property with an annual rent of £5, and graduates of British universities got to put the ballot in the box. Ten years later women got an unqualified vote.

When Rose took over at RBS on November 1, she became the sixth woman to lead a FTSE 100 company. Australia has seven in its ASX 100. But does having a woman as a CEO improve business outcomes? While well-meaning, the research is unclear. That caused Brooke Masters of the Financial Times to write of the RBS appointment: “What I am interested in is not just that a woman broke through another glass ceiling. Rather, it is that the sector is finally diversifying to the point where we might be able to tell whether adding women to top management and boards of directors makes any difference.”

This year IMF boss Christine Lagarde was more forthright in an interview with National Public Radio. “If there had been more Lehman sisters, it (the world) probably would have ended up in a safer place,” she said. “I’m saying that because I believe that it is true. Let me give you two numbers. One is if you look around the world at all the banks, only 2 per cent of them have CEOs who are women. If you look around the world at all the banks, only 20 per cent of board members are females. Now, that tells me that there is an element of bias and, possibly, of discrimination.”

On the boards of our top five banks, women take 20 out of 50 seats. Of the 10 directors at CBA, five are women.

A recent IMF research paper shows the problem: “Women are under-represented at all levels of the global financial system, from depositors and borrowers to bank board members and regulators. Greater inclusion of women as users, providers and regulators of financial services would have benefits beyond addressing gender inequality. Narrowing the gender gap would foster greater stability in the banking system and enhance economic growth. It could also contribute to more effective monetary and fiscal policy. New evidence suggests that greater access for women to and use of accounts for financial transactions, savings and insurance can have both economic and societal benefits.”

French business school professor Michel Ferrary analysed French CAC 40 companies at the height of the global financial crisis. His research showed the more women there were in a company’s management, the less the share price fell.

“Increasing the number of female managers is both an issue of corporate social responsibility and important for business performance,” Faverty wrote in the FT 10 years ago. “Usually, socially oriented managerial practices such as reducing discrimination are thought to be unprofitable for a company. It is a widely held belief that social issues contradict business goals. Thus, corporate leaders are reluctant to fight against inequality and shareholders have no incentive to support practices that could reduce profitability and dividends.”

Based on today’s evidence not a lot has changed.

This article by John Connolly appeared in the November 2019 issue of The Deal