It’s no surprise that the world of finance is male dominated, especially at the leadership level. While there are lots of women graduating from college with finance degrees, there still aren’t as many women CEOs and women on Wall Street as you might think.
In fact, 4.4% of Fortune 500 and S&P 500 companies have female CEOs, according to Catalyst. While about 74% of the industry’s assets are run by men alone, only 2% of these assets are handled by women alone. The remaining 14% is made up by a mix of men and women teams. Ideally, we would like to see a high percentage of mix-gendered teams and here’s why.
Balance is Important
Michelle Obama once said, “No country can every flourish if it stifles the potential of its women and deprives itself of the contributions of half of its citizens.” Yet, organizations are still not taking advantage of the female talent pool to source future leadership positions.
There are many reasons that can explain this systemic problem, a major one being traditional gender roles. There is also a strong association between male behavior and leadership that leads to an unconscious bias when hiring and promoting. Companies are evolving and now we see how women are needed to help balance and therefore benefit the finance industry.
The Changing World of Finance
As the world of finance changes, companies strive to become better business partners and support challenging business decisions. This has required an update in skill sets that goes beyond strong implementation skills and project management. Research has found that finance teams struggle with pathfinder skills—things like communication, strategic understanding, or talent management.
Pathfinder skills define effective business support and have great impact on department outcomes. There is a need for finance to become more collaborative, emotionally mature, and persuasive. Lucky for men who struggle with these skills, women are naturally inclined to exhibit these behaviors. Women’s ability to listen, persuade, motivate, and inspire others could make them a better fit than their male counterparts to head finance functions. With nurturing abilities, women are excellent at building and maintaining relationships to better organize their finance teams.
A main concern for employers is competency in their workers, not differences between how men and women work. Not many ever think about how the balance of a male-female workforce presents many benefits to the financial industry. Balance is a contributor to performance, innovation, and customer relations.
Parity can be seen through mixed gender networks rather than just promoting women. Since both men and women present positive and negative qualities, when paired together they can
benefit the finance world by balancing out each other’s negatives with positives, thus creating a better future.
Neuroscience Explains Why Finance Needs Women
Another way to look at this is through the lens of neuroscience. A study was conducted by Cambridge University’s John Coates to test his idea that the financial crisis was created, to some degree, by people’s (specifically men’s) body chemistry. Coates spent 12 years on Wall Street as a trader before moving to Cambridge to begin his Neuroscience and Finance research. After years of observing trader’s euphoria in the bubbles, he noticed that the traders were acting in a way that wasn’t normal for their behavior and delusionally taking too much risk.
“I had gone on a long term winning streak and I was expecting this bonus, I got a chemical high that was as powerful as any urge I had ever felt and it is very difficult to control,” Coates noted about the high one gets while winning. “Similarly when you are losing money, you come to see the world in a different way.”
He was convinced that body chemistries play a major role in male and females approaches to risk. In Coates’ experiments, he discovered that as testosterone levels rise in the body they affect the way one assesses risk. So if you have a financial community that is under the influence of these highly elevated chemicals, they become price insensitive and the monetary policy stops working. That is why Coates suggests including women in finance to balance out the hormone’s affecting men’s views. Just as the men will balance out the women’s hormones that create a more cautious approach to risk. The conclusion that came from this experiment clearly showed that a beneficial balance can be achieved that leads to a successful future by increasing the amount of women in Wall Street and the finance industry in general.
A Need for Women in Leadership
The best way to encourage women to choose a job in finance and keep them there is to have relatable leaders to look up to. And in order for there to be more women leaders, there needs to be less hurdles to jump as women. The climb to the top is tough for everyone, but women have particular challenges.
A major challenge for many women in leadership is being respected by investors or their employees. For most women working in a male dominated company, it is difficult for their male superiors or clients to connect with them. Unfortunately, there is still a prejudice against working women and leading women that makes the journey more painful.
This will change when young women can see female leaders setting the precedent for the future. By forging their own paths to leadership, female leaders can encourage, motivate and push the finance world to reach new heights by encouraging young women to follow their footsteps. Dolly Parton said it best, “If your actions create a legacy that inspires others to dream more, learn more, do more, and become more, then, you are an excellent leader.”
Jess Davis – beatthecpa.com Jess has helped hundreds of students pass the CPA Exam with study tips and strategies on her review website Beat The CPA.