- UK data shows that in 2020/2021, females in finance earned 75p for every £1 made by males, compared with 88p for females in all other sectors.
- Despite multiple opportunities last year to push for stricter policies on gender, multiple shareholder resolutions on the matter failed to pass.
- T. Rowe Price and J.P. Morgan Asset Management have the widest pay gap of the eight top-tier asset managers analysed by Capital Monitor.
Engaging with gender equality is a must for financial institutions pursuing a responsible investment strategy. The UN’s Environment Programme Financial Initiative – the signatories of which include banks, asset owners and asset managers with combined assets under management (AUM) of some $130trn – makes clear that promoting equity and inclusion is a core part of its philosophy.
On the surface, large financial institutions are talking a good game. References to ‘gender equality’ in the annual reports of the top 30 largest banks by assets, for example, jumped from 40 in 2016 to 175 in 2021, making it the second most commonly referred UN Sustainable Development Goal, according to Capital Monitor analysis.
However, data on gender parity in such firms’ own operations paints a slightly different picture.
Two clear and interconnected metrics – the difference between men and women’s median hourly wages at a company, and women’s representation in senior or higher-paid positions – are useful for helping to assess the situation within companies.
Primarily focusing on the first – the gender pay gap – Capital Monitor finds that, despite touting their ESG credentials, financial institutions are not always practising what they preach when it comes to gender equality.
Analysis of more than 8,000 UK companies’ pay disclosures from 2020 shows that UK banks and asset managers maintain a larger gender pay gap than most other sectors.
Companies operating in the UK with more than 250 employees are required to disclose this data by the British government. Although these figures may not be representative of the company as a whole, it is standard for financial institutions to refer to this UK data in their reporting.
Headline pay stats
The average median hourly pay gap for most companies was 12% in both 2017 and 2020, meaning female employees earned an average of 88p for every £1 male colleagues earned.
But for the 36 banks and asset managers covered in Capital Monitor‘s analysis, the gender pay gap is much wider. In 2017, females in finance earned an average of 71p for every £1 a male earned. In 2020, that gap narrowed, with females earning 75p, which, while an improvement, remains below the national average.
The figures for women in senior positions at asset managers are equally imbalanced. Just 23% of employees in the top pay bracket at such firms are women, compared with 40% in all other companies. This is a slight increase of three percentage points on 2017.
To see how far asset managers’ internal gender pay gaps square with their voting on this topic at other companies, Capital Monitor focused on eight of the largest asset management firms where UK pay and stewardship data is available.
Practising what they preach?
Last year, there were five resolutions globally specifically related to gender pay gap reporting, according to financial non-profit ShareAction’s database of a total of 89 social and 53 environmental resolutions from last year’s AGM season.
The five were at Biogen, Cigna, Oracle, Amazon and Intel. The first three asked for companies to report on their gender pay gap; the last two asked the companies to report on their gender and racial pay gap. ShareAction sourced the data (presented in its 2021 assessment of ESG voting) from voting aggregation service Proxy Insight, excluding resolutions that received less than 5% support.
That none of them received majority support indicates investors are not going out of their way to narrow the gender pay gap in portfolio companies.
Consistent pay activity
Although it is hard to conclude there is any correlation between how asset managers voted on these resolutions and their own internal actions to reduce the gender pay gap, a small handful of names appear to be acting consistently with their own principles.
Allianz Global Investors and Legal & General Investment Management (LGIM) both supported 100% of gender pay resolutions and were among those to reduce significantly their own gender pay gaps during the past three years. This indicates gender parity is a key priority for them across their operations (see chart below).
On the flip side, T. Rowe Price voted against all but one of these five resolutions. It has the largest gender pay gap out of each of the ten asset managers. “Whilst we have made progress in some areas, we know that there is more work to do to make our organisation more equitable and diverse,” says Scott Keller, head of EMEA distribution and chair of the newly formed EMEA Leadership Council at T. Rowe Price.
J.P. Morgan Asset Management (JPAM) is less consistent. The US investment manager voted in favour of two out of five resolutions and frequently engages with companies on gender pay disparity, as detailed in its stewardship report.
However, it appears to be grappling with its own gender pay issue. While it is marginally reducing its gender pay gap at a group level, its UK asset management branch’s pay gap increased by five percentage points since 2017, according to its disclosures to the UK government. JPAM declined to comment for this story.
In contrast, Vanguard and State Street Global Advisors (SSGA), which only voted in favour of one gender pay resolution, respectively have the third-smallest and smallest gender pay gaps out of all of the ten institutions analysed.
Not about equal pay
It is important to note that a gender pay gap does not automatically mean women are paid less for the same positions; it may simply reflect there are fewer women in higher-paying roles.
The lack of a ‘pipeline’ of female talent coming into finance is increasingly gaining attention, as is diverse representation more generally. Each of the ‘social’ shareholder resolutions last year at banks were related to diversity, according to ShareAction’s annual report.
This includes a resolution at US bank Citigroup to report on its racial equity audit, which received 39% shareholder support, while the same resolution at Goldman Sachs received 31% shareholder support. In total, just 20% of these 15 resolutions received majority support, showing that shareholders are not going out of their way to tackle gender equality within banks either.
Gender equality: An intrinsic good
SSGA, with the smallest gender pay gap of the institutions analysed, voted for just one of the five gender pay resolutions above. However, it has recently expanded its voting policy to be tougher on portfolio companies.
In his annual proxy letter published in January, SSGA chief executive Cyrus Taraporevala said the firm was prepared to vote against the chair of the board’s nominating committee for companies in the US, Canada, UK, Europe and Australia markets that fail to reach 30% female board participation by 2023.
Benjamin Colton, global head of asset stewardship at SSGA, says focusing on gender diversity is about more than pursuing equality as an intrinsic good.
“The reason why we're focused on gender diversity is because it's a powerful instrumental variable or proxy for diversity in thought,” he tells Capital Monitor, pointing to academic literature to support this position. “[There is] less cronyism and more innovation [leading to] better business outcomes."
Asked whether there is enough data to prove that gender diversity directly leads to diversity in thought, Colton insists we’re “going to see the positive benefits of diversity emerge over time”. But he concedes that in order for them to materialise, critical mass is needed; SSGA defines this as 30% female representation.
Another indication of how far companies are pushing for greater diversity is whether or not they link CEO compensation to diversity targets. BlackRock, where the gender pay gap has marginally grown over the past three years, has such a target.
Last year, BlackRock hit its 30% women in senior leadership target, and as a result awarded its CEO Larry Fink a bonus of roughly $1.9m, according to Capital Monitor’s deep dive on this topic. The two other investors mentioned in this article that apply this approach are Allianz Global Investors and T. Rowe Price.
