Women in finance Contents

2Benefits of gender diversity

16.When assessing the benefits of gender diversity, there are various potential benefits that could be considered. Some of the benefits could impact the staff employed in a company and the company’s culture, while other benefits could impact a company through improved business performance.

17.Many studies have been carried out to establish whether there are quantifiable benefits to a company’s performance attributable to the level of gender diversity. Mckinsey & Company found “a statistically significant relationship between a more diverse leadership team and better financial performance”6 and that “companies in the top quartile of gender diversity were 15 per cent more likely to have financial returns that were above their national industry median.”7

Credit Suisse found that:

Companies with at least one female director had generated a […] excess return per annum of 3.3 per cent for investors over the previous decade […] [and] companies where women made up at least 15 per cent of senior managers had more than 50 per cent higher profitability than those where female representation was less than 10 per cent.8

18.Other non-quantifiable benefits of gender diversity have also been put forward. Virgin Money have stated that “the business case for diversity has three elements: increased challenge and reduced chance of ‘groupthink’, enhanced connection to customers, and access to a wider talent pool. This should mean that increased diversity will provide firms with a competitive advantage.”9

19.When asked to describe the problems of teams without gender balance, Jayne-Anne Gadhia, Chief Executive Officer of Virgin Money, said:

The conversation is different from when you are in a room with a balanced team of people. […] There was less challenge; there was less balance in the discussion […] it is definitely the quality of the debate and the progress of the dialogue [that is impacted].10

Virgin Money also stated that:

Regulatory and Parliamentary investigations of firm failure during the financial crisis pinpointed ‘groupthink’ and lack of effective challenge on Boards and within senior management as one of the key causes of poor decision-making within firms who had to be bailed-out or failed. Greater diversity amongst senior leadership teams therefore also has a role to play in promoting financial stability.11

Dame Helena Morrissey, Head of Personal Investing at Legal and General, also shared this view and argued that:

The dangers of gender imbalance were painfully illustrated by the cataclysmic financial crisis a decade ago. Groups of very similar people […] are unlikely to be optimal teams, however individually brilliant the members. There is too much risk of ‘groupthink’, not merely colleagues tending to agree with each other but the pernicious exclusion of dissenting opinion and challenge.12

20.Amanda Blanc, Group Chief Executive Officer for AXA UK and Ireland, gave examples of how a board room discussion with greater gender diversity worked:

In France, the AXA SA board has to have a 40 per cent female balance. Having attended one or two of those meetings, sitting and being part of the discussion—it is 43 per cent women to 57 per cent men on the AXA SA board—it is definitely a different discussion. There is definitely a different feeling in the room. You cannot quantify it in any way, which is the difficult thing, but [gender diversity on the board] gives a different culture and feeling.13

21.Anne Richards, Chief Executive Officer of M&G Investments, also shared this view and argued that the best use of talent would inevitably bring benefits:

There is an element of this that is about using the talent that we have right across society as effectively as we can do. […] If you are restricting yourself, intentionally or unintentionally, to a narrower pool […] you are simply not getting access to the best possible talent. I absolutely believe that the more different paths people have walked in life, when you bring them together, the better problemsolving you get. That applies to virtually every decision that you are making, but if you are not doing that—if you are not looking very broadly—you are restricting yourself in the talent pool.14

22.Research has found that firms with higher numbers of women in senior management positions perform better financially than counterparts with lower numbers of women in senior management, with returns above their national industry median.

23.Some of the benefits of gender diversity cannot be measured quantitatively. Gender balance can be conducive to more “open” discussions where challenge and diversity of thought are welcome. Furthermore, greater diversity for firms serving clients can help them relate to a more diverse range of clients.

24.Notwithstanding the benefits of gender diversity from a business perspective, the representation and progression of women in finance should also be regarded as intrinsically right. The near exclusion of any group within society, intentional or unintentional, is not acceptable.

25.Despite the benefits of gender diversity, the financial services industry falls well short. The number of women represented in financial services companies diminishes in line with seniority. Nevertheless, the Committee is encouraged by the gradual implementation of initiatives by industry and Government to improve on the current position. The Committee will continue to monitor industry and Government policies during this Parliament.

6 Mckinsey & Company, Diversity Matters (February 2015). McKinsey & Company’s analysis used data from 366 public companies across a range of industries in the United Kingdom, Canada, the United States and Latin America. The data collected included the composition of top management and boards in 2014 and financial data, earnings before interest and tax for the years 2010 to 2013.

7 Ibid

8 Credit Suisse, The CS Gender 3000: The Reward for Change (September 2016) Credit Suisse’s analysis used data from 3,000 companies across 40 countries and all major sectors.

10 Q7

11 Virgin Money (WFN0011)

12 Dame Helena Morrissey (WFN0021)

13 Q174

14 Q150

Published: 13 June 2018