For the past several months, controversy has been brewing across the Atlantic about the possibility of the European Commission imposing gender quotas upon company boards. In fact, it's possible that certain European companies will soon be required to have 40 percent of their board seats occupied by women. Which, at a glance, might sound like a good idea. That is, why not force firms that are most definitely not embracing female diversity to place a significant number of women in senior roles (albeit non-executive roles, which is to say roles that aren't technically inhabited by employees but outside directors). Looking a bit deeper into quotas, though, and it's very possible, and even probable, that they could prove more harm than good when it comes to increasing female representation at the top of finance firms org charts. And no one knows just how much harm more than the top-ranking women on Wall Street.
Last week, several prominent women in European finance (all of whom were recently named to the 2012 FN100 Most Influential Women in Finance list) were asked (in an interview posted on The Wall Street Journal website) for their views on gender quotas. And many spoke out against them.
Elizabeth Corley, the CEO of Allianz Global Investors, called quotas "misguided" and "a heavy stick" and said they should be used only as "a last resort." Corley also said there should be more emphasis on "proactive policies" (though she didn't mention what those may be) and pointed out that under quotas there will always be suspicion that someone attained a position not on their own merit but because of a quota. Which, she pointed out, is a "bit of a burden for anyone to deal with." Indeed, not only would a woman appointed a board seat under a quota system be on the receiving end of much suspicion, but all other senior female employees working for that company would be as well. Which, of course, would only hurt women in the workplace, not help them.
Also coming out against quotas was Marisa Drew, a Credit Suisse managing director. She agreed woth Corley that quotas could have "unintended consequences, undermining … gender representation." Which is to say undermining women in the workplace. However, Drew also said there should be a "nudge," explaining that "if there isn't some type of a pressure with the perception that there are consequences on the back end, I think the excuses for inaction remain."
That nudge, according to Drew, shouldn't come from quotas but from finance professionals themselves. Now that the topic of the lack of senior-level women in finance is being talked about, Drew said finance firms need to "keep the spotlight on the issue" and work hard toward increasing women's representation in senior roles. While Drew conceded that women haven't gained much ground in the past decade in finance, she expressed some (although not much) confidence that ground could be made in the coming years.
Caroline Silver, a partner at Moelis & Company, said that she understands why some people support quotas, but believes it should ultimately be up to boards to decide who's the best person to hire, irrespective of gender. More important, according to Silver, is the industry and regulatory focus shouldn't be on increasing female representation in non-executive roles (where, incidentally, it's possible that one woman could work on numerous boards, fulffiling several quotas on her own) but on increasing female representation in executive roles, that is, in senior management throughout finance firms. Silver called this "the real challenge."
Another challenge, and perhaps the most important of all challenges when it comes to increasing female representation in senior roles in finance (both overseas and here in the U.S.), is convincing firms that this isn't just a diversity issue but a business issue as well.
In a Wall Street Journal article published this past summer entitled "Women in Finance Are Cold on Quotas," Pam Kaur, the global head of audit at Deutsche Bank, was cited as saying "there was a clear distinction between companies that want to address gender imbalance because it seems the right thing to do politically, and companies that believe it makes business sense."
In other words, there are still many finance firms (most likely a majority of the largest) that still believe gender inequality in their ranks is not a serious issue, or, at least, not an issue that could affect their bottom lines. Which is certainly shortsighted given the amount of recent data (some of which appeared in the aforementioned Journal article) that supports the belief that diverse senior management teams result in larger profits. And given that many finance industry observers have asked if the financial crisis of 2008 could have been mitigated had their been more estrogen in banking C-suites. And given that some observers, including this one, believed the answer to be yes.
Will Quotas Help Women Into the Boardroom? (WSJ)
Women in Finance Are Cold on Quotas (WSJ)
Britain Objects to Quota for Women on Boards (NYT)
FN100 Most Influential Women: Investment Banking (Financial News)