This major case has sent heart rates rocketing throughout City boardrooms, and once again raised the thorny question that the chaps in grey suits would rather you didn’t ask: why the hell do men working in finance earn so much more than women?
In April 2009, the then Minister for Women, Harriet Harman, described the financial industry as a “breeding ground for discrimination”. The facts certainly back her up. An inquiry by the Equality Commission revealed that women in the City were being paid as much as 60% less than male counterparts. The following three theories are generally wheeled out to explain this shocking discrepancy:
1) Men are smarter and more diligent than women. While some reactionary members of the Flat Earth Society may uphold this view, the facts don’t bear them out. Girls beat boys at school, and women — as revealed in a 2009 Cambridge report — are beginning to dominate other “status professions”.
2) “The fairer sex” just doesn’t cut the mustard when it comes to the aggressive, cut-and-thrust world of investment banking. Every time a trader or fund manager buys or sells an asset, he is implicitly expressing his conviction that the market (ie everyone else) has foolishly mispriced it. To do this confidently day in day out arguably requires the kind of boundless arrogance that Simon Cowell would deem excessive. Egotism is a character trait many believe is more prevalent in the male of the species — especially the young, boorish loudmouths the City attracts.
3) The City is a sexist boys’ club whose members are loath to promote women. I’ve no doubt that this is true, and also that the glass ceiling is not just the product of some irrational frat-boy urge to keep women in their place so pinstriped bozos can sit around the boardroom chomping cigars and telling sexist gags.
Like most things in the City, it is, unfortunately, deemed an economically rational response to women’s future earning potential which is diminished by their outrageous urge to go off and procreate in their thirties.
This disturbing practice can be particularly damaging to a City career as a few months off can easily scupper a client relationship or a big corporate deal.
I think there is one more compelling reason for the huge gender pay discrepancy in the City: men are conditioned to take risks and break rules to a greater extent than their sisters. This explains the near absence of women who participate in hazardous practices such as mountain climbing, base jumping or robbing banks.
It may also help explain why the traders and hedge-fund managers (both especially high-paid and high-risk City jobs) who I met over my career were nearly always men.
Since you learn on day one of your career in finance that there is a strong correlation between risk and reward, the competitive, insecure men who populate the investment banking world immediately conclude that taking risks is what “real men” do, while caution is for “gutless choirboys”.
Combine this realisation with the City boys’ insatiable urge to earn more than their peers and their propensity to put all their chips on black becomes understandable.
Unfortunately, this “justification” of the gender pay differential also helps to explain the recent financial crisis. It was the overriding compulsion to maximise short-term bonuses by semi-criminal, testosterone-fuelled bankers that led to the world being infected with more than a trillion dollars’ worth of risky financial products that were so clearly doomed to explode, bringing about the credit crunch.
What else, other than man’s desperate wish to create short-term profits through reckless gambling, can explain the bloody-minded madness that almost brought capitalism to its knees?
Massive risk-taking can produce mega profits but it also produces financial meltdowns.
Perhaps then, if there had been more women working in finance, and the bonus system didn’t reward excessive gambling, we wouldn’t all be suffering from the financial troubles that persist. So maybe it’s time that banks actively sought out the more sensible approach that women tend to exhibit, and reform the current system of pay that so blatantly discourages prudence and long-termism.
Unfortunately, the men who dominate the current financial system, and their politician mates, are highly unlikely to seek any changes to a status quo that has served them all so well — even if such changes would result in resounding benefits for society as a whole. Perhaps this explains why financial reform is so slow in coming to Britain.