For the first time ever, women are holding some of the world’s most influential jobs. In the US, the treasury secretary, commerce secretary and trade representative are all female, as are nearly half of the new administration’s cabinet officials. A woman runs the International Monetary Fund and another the World Trade Organisation.
There is currently a total 24 presidents and prime ministers who are women. And some 14 central banks are run by women, including the European Central Bank. Women are beginning to lead some of the world’s largest private sector banks too.
Possible reversal
It should be a moment of celebration: these figures indicate progress towards a more balanced distribution of power, as well as economic contribution across genders, from which everyone will benefit. Yet other, worrying numbers point to a possible reversal of the trend that led us here. Among corporate ranks, many more women than men are considering “downshifting” their careers or dropping out altogether, according to research by McKinsey and LeanIn.Org.
Last year in the US, 23% of mothers with children under the age of 10 considered leaving the workforce — this is 10 percentage points higher than the number of fathers who reported the same, as women ended up shouldering far greater responsibilities during the pandemic. Overall, mothers considered quitting much more than fathers did. Further, all women surveyed reported higher pressure to work more and higher levels of exhaustion, particularly in more senior positions.
These figures are heart-sinking. And they raise several questions: how long can those women hold on to their senior roles if pressure at work and at home doesn't ease off? Will this be a temporary set-back or lead to a chronic issue, as the pandemic is far from resolved? And what will happen to those organisations letting women fall out of work?
A study by the Cass Business School at City University of London offers a very specific and poignant case in point. The study, which was also recently mentioned in Harvard Business Review, looked at the number and size of fines US authorities charged against European banks since the financial crisis. This specific group was chosen because of the quality of available data and because it escapes the risk of interference from lobbying and connections between banks and domestic regulators. It is also a relevant group as, after the crisis, European banks were fined four times more than their US peers, or 77% of the total of all fines issued by US regulators, note the researchers, who looked at data between 2007 and 2018.
[There is] a correlation between larger numbers of women on bank boards and a lower tendency to commit fraud
They found a positive correlation, as well as causation, between larger numbers of women on bank boards and a lower tendency to commit fraud, which they quantified in potential annual savings of $7.48m because of less frequent misconduct fines.
No doubt
The researchers also made sure to test it was definitely women that made the difference and looked at other factors, such as number and volume of past fines, bank and board size, and tenure of the CEO, among others. While any other diversity variables, such as variety of ages and nationalities, reduced misconduct, it was gender diversity that was “economically significant”, write the authors.
They offer an explanation too: “The mechanism through which gender diversity affects board effectiveness in preventing misconduct stems from the ethicality and risk aversion of the female directors, rather than their contribution to diversity.”
They also note that: “Female directors are more influential if they reach a critical mass and are supported by women in leadership roles.”
Reaching that critical mass requires awareness of its need and of the unequal challenges women continue to face. Dismissing the numbers — good and bad — will help no one.
Silvia Pavoni is the economics editor at The Banker.
