How Gender Equality Can Empower the Global Economy
In today's macro environment, stronger diversity and inclusion policies from companies and governments could provide the global economy a much-needed shot in the arm.
Companies and investors are searching for levers to help revive their moribund economies. One that is close to hand and requires zero innovation is gender equality.
It sounds easy in theory. Unleashing the full potential of almost 50% of the global population would be a simple way to boost productivity and economic output. Achieving this, however, will require a sizeable readjustment. One that involves company culture, government policy and society at large.
“We have to become better at rewarding competence instead of confidence,” says Dr Ylva Baeckström, senior lecturer at King’s College London, and author of the book Gender and Finance. Baeckström believes that stereotype expectations based on gender are limiting opportunities for people of all genders in the workplace.
It sounds easy in theory. Unleashing the full potential of almost 50% of the global population would be a simple way to boost productivity and economic output. Achieving this, however, will require a sizeable readjustment. One that involves company culture, government policy and society at large.
“We have to become better at rewarding competence instead of confidence,” says Dr Ylva Baeckström, senior lecturer at King’s College London, and author of the book Gender and Finance. Baeckström believes that stereotype expectations based on gender are limiting opportunities for people of all genders in the workplace.
Positive trends
Corporates have been moving in the right direction. In the UK, which sits above the global gender diversity average, 2022 analysis of the FTSE 100 found that 18 companies had 50% or more women on their boards, while 10 firms have one-third or fewer women board directors. Of these, there are nine women CEOs and 18 women chairs. Beyond the UK, in the global financial services sector, women held 21% of board seats, 19% of C-suite roles, and 5% of CEO positions in 2021.
While the continued increase in the number of women on corporate boards represents some progress, the magnitude and persistence of the participation gap between men and women on the world stage is striking.
Among all but five developed countries, women have, on average, more years of tertiary education than men. Despite this, according to data collected by the World Bank and the abrdn Research Institute, almost 37% of adult women in the developed world are not participating in the labor force..
“We’ve got to remove the bias in policy making,” says Baeckström. “We need governments to lead on this by creating gender equal polices that signal that business is for all genders and that parenting is for all genders.”
While the continued increase in the number of women on corporate boards represents some progress, the magnitude and persistence of the participation gap between men and women on the world stage is striking.
Among all but five developed countries, women have, on average, more years of tertiary education than men. Despite this, according to data collected by the World Bank and the abrdn Research Institute, almost 37% of adult women in the developed world are not participating in the labor force..
“We’ve got to remove the bias in policy making,” says Baeckström. “We need governments to lead on this by creating gender equal polices that signal that business is for all genders and that parenting is for all genders.”
A culture shift is needed
Amanda Young, Chief Sustainability Officer at abrdn believes that the policy challenge of increasing female participation in the workforce largely falls into two camps: country-level activity and company-level activity. Having the right policies is important, but changing the culture is necessary to embrace and adopt these policies. “Unconscious bias is a significant issue. Therefore, eliminating it is a crucial part of driving cultural change,” she says.
This may go some way to explaining the gender financing gap. A poll among the US population showed that half the population wants to work for women rather than men. Yet the proportion of venture capital funding that went to women-run businesses in Europe last year stands at 1-2%. About 87% of funding went to male-only founding teams.
In the venture capital world and beyond, there are still some executives “who don't recognize the massive benefit” diverse workforces bring, says Young.
This may go some way to explaining the gender financing gap. A poll among the US population showed that half the population wants to work for women rather than men. Yet the proportion of venture capital funding that went to women-run businesses in Europe last year stands at 1-2%. About 87% of funding went to male-only founding teams.
In the venture capital world and beyond, there are still some executives “who don't recognize the massive benefit” diverse workforces bring, says Young.
Cognitive diversity
There is a growing data that evidence that diverse teams and organizations perform better.
Amanda Young was first introduced to this ten years ago when a piece of bank research showed that boards with women perform male only boards, and that “those with more women performed better than those with just one woman on the board,” she recalls.
Today analysts have stronger data sets to work with. McKinsey recently found that allowing women to contribute fully to the workforce could add $28 trillion to the global economy by 2025.
Bloomberg Intelligence (BI) has noted that performance can be strengthened by screening out companies that trail on diversity metrics such as female directors. BI researchers back tested the Stoxx 600 Index between 2013 and 2020 to find that the highest quintile in terms of female directors produced the best performance.
Amanda Young was first introduced to this ten years ago when a piece of bank research showed that boards with women perform male only boards, and that “those with more women performed better than those with just one woman on the board,” she recalls.
Today analysts have stronger data sets to work with. McKinsey recently found that allowing women to contribute fully to the workforce could add $28 trillion to the global economy by 2025.
Bloomberg Intelligence (BI) has noted that performance can be strengthened by screening out companies that trail on diversity metrics such as female directors. BI researchers back tested the Stoxx 600 Index between 2013 and 2020 to find that the highest quintile in terms of female directors produced the best performance.
Creating a talent pipeline
Young is positive that the momentum won’t fall away. For years, an inadequate pipeline of female talent has been blamed as a reason for the continuing lack of women leading blue-chip firms. That’s why abrdn’s focus has been to seek a balanced set of applicants at the entry level.
“We put a lot of emphasis on our graduate trainee program,” she says. “We hold internal sessions where we bring in students to talk about what jobs there are in financial services. Putting senior women in front of those young ladies demonstrates that financial services can be just as good a career path as, say, going into retail or more art-based industries. This type of focus-targeted recruitment at a graduate level is really important.”
She emphasizes the importance of having a flexible parental leave policy, too. It’s one of the initiatives Young feels most proud of—that abrdn has been able to integrate an understanding of these softer issues into its investment process.
“We put a lot of emphasis on our graduate trainee program,” she says. “We hold internal sessions where we bring in students to talk about what jobs there are in financial services. Putting senior women in front of those young ladies demonstrates that financial services can be just as good a career path as, say, going into retail or more art-based industries. This type of focus-targeted recruitment at a graduate level is really important.”
She emphasizes the importance of having a flexible parental leave policy, too. It’s one of the initiatives Young feels most proud of—that abrdn has been able to integrate an understanding of these softer issues into its investment process.
Embedding change
“At abrdn, we’ve run research into how parental leave policies can help women participate in the workforce but also how this can tangentially lead to better performance for the companies; thereby contributing to global economic growth,” she says.
The UK at large has a way to go on this issue. Baeckström contrasts the UK with Sweden where shared parental leave has been available for almost 50 years.
The challenge, then—for investors and business leaders—is to embed a change in mindset, both at societal and corporate level. The businesses that understand the direct and indirect value of adopting a holistic view of diversity, equity and inclusion will be set up for productivity gains in the future.
“Investors have emerged as influential agents of change and therefore have an important role to play,” says Baeckström. “They are already using their power to promote sustainability. They can do the same when it comes to gender equality.”
The UK at large has a way to go on this issue. Baeckström contrasts the UK with Sweden where shared parental leave has been available for almost 50 years.
The challenge, then—for investors and business leaders—is to embed a change in mindset, both at societal and corporate level. The businesses that understand the direct and indirect value of adopting a holistic view of diversity, equity and inclusion will be set up for productivity gains in the future.
“Investors have emerged as influential agents of change and therefore have an important role to play,” says Baeckström. “They are already using their power to promote sustainability. They can do the same when it comes to gender equality.”
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