Does the Investment Banking Wage Gap Still Exist?

April 10th. What does that day mean to you?

To women across the country, April 10th is known as Equal Pay Day, symbolizing how far into the year women must work to earn what men earned in the previous year.

The National Committee on Pay Equity launched Equal Pay Day in 1996 to raise awareness about the disparity between men and women’s wages. On average, women earn less than men. Therefore, they must work longer for the same amount of pay. Unfortunately, the wage gap is even greater for most women of color.

According to the U.S. Census Bureau, women make about 79 cents for every $1 men earn, which is the smallest gap since 1963 when it was 59 cents. In her 2015 book, Selling Women Short: Gender and Money on Wall Street, author Louise Marie Roth concludes that women working on Wall Street make 71 cents for every $1 men earn – taking into account the same experience, credentials and job responsibilities. Wall Street Oasis reveals specific, timely data throughout this article.

This, according to U.S. News and World Report, means equal pay, much less the glass ceiling, might as well be a dark tinted, bulletproof funhouse mirror.

Work/Life Balance & The Wage Gap

Key Observation 1: Many believe that societal expectations of women and lifestyle choices affect women’s pay.

Many believe that another factor plays a strong role in the wage gap – societal expectations of women.
According to Warren Farrell, author of Why Men Earn More, childless, never-married women make 117% of what their male counterparts earn, based on his interpretation of U.S. Census data. He draws the conclusion that lifestyle choices affect women’s pay.

This is not earth-shattering news. Since family and home responsibilities continue to fall primarily on women, they remain at a disadvantage in an industry where hours worked and face time at the office are viewed as a badge of honor. In fact, most women leave investment banking during the middle of their career when they seek more flexibility after having children.

“The main issue remains face time,” says an executive director based in New York. “Banks want women in the office the whole time. Bums on seats are important, even if you could easily work remotely. This lack of flexibility forces many women to quit voluntarily.”

Yet, numerous investment banks promote their employees’ high rate of return after maternity leave. Some investment banks have also begun to offer “back-to-work after children” programs. According to many women, these programs portray a nice image, but the reality of the job demands remains unchanged.

Wall Street Oasis’ 2017 Investment Banking Reports also include respondents’ opinions on which firms provide the most satisfying lifestyle as defined by three sub-categories. The top three firms for “Best Work/Life Balance” are:

• SunTrust Robinson Humphrey
  
• Credit Suisse
  
• Wells Fargo Securities
  

This is important as we mentioned previously that many women cite lack of work/life balance as a precipice for exiting investment banking upon starting a family. Both Credit Suisse and Wells Fargo Securities were in the top 20 investment banking firms for female representation at 13.5% and 13.2% respectively, while SunTrust Robinson Humphrey lands toward the bottom of the list at 5.6%.

Investment Banking Wage Gap - A Female Perspective

Key Observation 2: Ivy League female alumni make 30 percent less, on average, than their male counterparts, according to a February 2017 article in The Atlantic.

Some acknowledge the work/life balance component but take issue with it often being used as an excuse to trivialize other factors contributing to the wage gap.

Perhaps one of the most outspoken critics of the gender pay gap is Sallie Krawcheck, who famously left Bank of America in the midst of a power struggle and now runs Ellevest, a company with an online investment platform aimed at women. According to Krawcheck, compensating men and women equitably and creating more balanced gender representation isn’t that difficult. As she says bluntly, "Just friggin' pay them more." Krawcheck goes further and adds, "Oh, and if you haven't stopped to check whether you have a gender pay gap? You do."

Francesca Federico, co-founder and principal of Twelve Points Wealth Management in Boston, echoes Krawcheck’s sentiment. "It's an old boys' club, usually with men pulling other men in," Federico explains. "I think women have had a hard time breaking in because there have never been that many to begin with."

Strikingly, Ivy League female alumni make 30 percent less, on average, than their male counterparts, according to a February 2017 article in The Atlantic. While they graduate with higher GPAs and start at similar salaries, somewhere between the ages of 26 and 34, their male classmates advance professionally at an unmatched pace. It seems the more education you and the more money you make, the wider the wage gap.

According to Fortune Magazine, Marianne Lake, who became JPMorgan’s CFO in 2013, was paid $8.5 million her first year. This was more than her predecessor, Doug Braunstein, was paid in 2012. However, Braunstein made $12 million in 2010, the year he landed the CFO job, $3.5 million more than Lake in her first year.

Investment Banking Gender Statistics

Key Observation 3: First-year women analysts at bulge bracket banks make less across the board, although the discrepancy is minimal. The Wall Street Oasis data supports anecdotal evidence of the wage gap widening as position level increases. Discrepancies ranges from -7.2% to -67.2% for base pay and bonus.

Anecdotal accounts and evidence are important, but what do the numbers show?

As a company that provides expert advice and services to those interested in entering the investment banking industry, this type of information is of great interest to Wall Street Oasis. The company’s 2017 Investment Banking Report provides detailed diversity statistics, including female representation percentages at investment banking firms. The following information provides analysis and insight into those figures.

The 2017 Wall Street Oasis Investment Banking Report ranked the Top 10 Companies for Female Representation. The firms with the highest percentage of female representation are listed below.

• RBC Royal Bank of Canada = 31.6%
  
• BNP Paribas = 24.1%
  
• JPMorgan Chase = 23.7%
  
• Goldman Sachs = 22.8%
  
• PNC Financial Services = 21.3%
  
• HSBC = 20.6%
  
• Societe Generale = 20.4%
  
• UBS AG = 19.4%
  
• Lazard = 18.8%
  
• Citigroup = 18.1%
  

The 2017 Wall Street Oasis Investment Banking Report also compiles compensation data and provides a gender comparison. The results indicate support for anecdotal evidence of a wage gap in investment banking.

Wage Gap – Bulge Bracket 1st Year Analysts
When analyzing compensation data for bulge bracket banks, first year women analysts make less across the board. At this level, the discrepancy is minimal, with the women making on average 6.2% less on base and 8.6% less on bonus (blended gap of 7.0%). This data includes figures from 214 total respondents, including 28 women.

Wage Gap – Bulge Bracket Associates
The Wall Street Oasis data also coincides with anecdotal evidence of the wage gap widening as position level increases. Significant disparities are seen at the associate level, especially with bonus. The discrepancy in base is similar to analysts at 6.7% less for women, but the bonus was a significant 55.8% less for women (blended overall gap of 24.0%). This data includes figures from 110 total respondents, including 11 women.

Wage Gap – Other Notable Banks
The compensation data for other notable banks shows first year women analysts make nearly the same for base pay yet receive 14.0% less for bonus pay (4.5% less pay overall). This data includes figures from 192 total respondents, including 21 women. Given the small sample size of three female respondents, the compensation data at the associate level does not have statistical significance.

Overall Compensation & Female Representation Comparisons

Key Observation 4: Both Citigroup and Bank of America are in the top 10 firms for highest female representation yet also make the list for highest wage discrepancies.

In addition, the 2017 Wall Street Oasis Investment Banking Report provides detailed information regarding overall compensation for both the bulge bracket and other notable banks categories. It’s interesting to compare those figures with WSO’s Diversity Statistics Report, which estimates:

• Female representation at the investment banks
  
• Diversity metrics including how homogeneous or diverse a bank is
  
• Preference for candidates with a military background
  
• Preference for candidates with a varsity athletic background
  

In the bulge bracket bank category, the top three investment bank firms for overall compensation are:

• Goldman Sachs
  
• Citigroup
  
• Bank of America/Merrill Lynch
  

Two of these, Goldman Sachs and Citigroup, are in the top 10 for female representation. Bank of America/Merrill Lynch is in the top 15 at 14.3% female representation. It’s interesting that both Citigroup and Bank of America also make the list for highest wage discrepancies.

The top three other notable banks for overall compensation are:

• Houlihan Lokey
  
• Lazard
  
• SunTrust Robinson Humphrey
  

Lazard ranks in the top 10 for female representation. However, both Houlihan Lokey and SunTrust Robinson Humphrey fall short at 9.7% and 5.6% respectively. Houlihan Lokey was also mentioned above with a -2.2% base pay wage gap.

Each company listed in the report needed to provide at least 10 submissions to be included.

Real World Stories, Opinions & Advice

Key Observation 5: According to author Maureen Sherry, “As you get more senior, the pay disparity, the accounts being unequally distributed {among gender} becomes more apparent. It bothered me.”

These statistics wouldn’t surprise Laurie C. Kamhi, current director and partner at HighTower's LCK Wealth Management. According to Kamhi, "While interviewing for jobs early in my career, two top investment banking firms brought me in after looking at my resume and assuming that Laurie was a nickname for Lawrence," says Kamhi. "Once I arrived and they saw I was a woman, the interviews were over." Kamhi persevered and was recognized by Private Asset Management magazine in 2015 as one of its 50 most influential women in private wealth.

According to Maureen Sherry, author of the best-selling novel, Opening Belle, and a managing director at Bear Stearns in the 1990s, “Some people have taken issue with {the main character} making so much money. If she were a supermodel or a celebrity, I don’t think people would mention it. People react differently to an ambitious woman.”

Sherry continues, “In your early 20s, you’re just happy to have a job. I loved the markets and the trading floor atmosphere. As you get more senior, the pay disparity, the accounts being unequally distributed {among gender} becomes more apparent. It bothered me.”

A positive outcome of Sherry publishing her novel is receiving requests from three investment banks wanting her to come and speak. She’s encouraged that they want to do better.

Kathleen A. Grace, managing director at United Capital and based in Boca Raton, Florida, sees and has experienced the disparity but encourages women to analyze the numbers from a different perspective. Yes, women are nearly 50% of the workforce yet still represent less than 25% of the investment industry. However, Grace points to a decades-long study by Terrance Odean at the University of California, Berkeley. "Single female investors outperformed single men by 2.3%, female investment groups outperformed male counterparts by 4.6%, and women overall outperformed men by 1.4%," Grace says.

Others, however, aren’t quite so sure. Megan Messina said she was offered $500,000 from Bank of America to settle a case alleging her boss favored male employees. Messina, a former Bank of America managing director, sued her employer in May 2016. Along with citing outrageous pay discrepancies between men and women, she also claimed her male supervisor told her she wasn't welcome in his “bro's club” and consistently excluded her from e-mails and meetings with the ten men he oversaw. Bank of America waited two months to respond that no such club exists. Is the damage already done? Will this lawsuit discourage women from pursuing a career with Bank of America, which ranks in WSO’s top three for compensation but only top 15 for female representation?

Bank of America isn’t alone. According to a lawsuit filed in January 2017, JPMorgan Chase paid female employees less than their male counterparts. The Labor Department lawsuit seeks to halt new federal contracts with the massive bank until it compensates the women. The lawsuit asserts that, JPMorgan Chase paid at least 93 women employed in its Investment Bank, Technology & Market Strategies unit less than men employed in the same positions since at least May 2012.

It’s unfair to paint all investment banking firms with a broad brush, so it's important to do your research. Neutral sources such as LexisNexis will highlight past news stories about sexual harassment and gender inequity lawsuits filed against a potential employer.

Shatter the Glass Ceiling?

Key Observation 6: Beth Blecker, CEO of Eastern Planning Inc., believes relating to female investors as a woman makes a huge difference.

While shattering the glass ceiling still remains an amorphous concept for most women in investment banking, one woman offers a different perspective. Beth Blecker, CEO of Eastern Planning Inc. in Pearl River, New York, downplays the benefits of breaking the glass ceiling in the traditional industry in favor of paving your own way.

According to Blecker, who manages $300 million, “On Wall Street, women need to be better than their male counterparts in order to be considered good…and, even then, acceptance is not guaranteed.”

Blecker chose to build a new model of success and encourages other women to do the same. The majority of the money she manages comes from high net-worth women, and Blecker believes relating to them as a woman makes a huge difference. "The same trait that makes women vulnerable on Wall Street – their compassion – can make them very successful as true wealth managers, especially if they are willing to explore the independent channel," explains Blecker.

Perhaps the image of shattered glass will become an antiquated goal, replaced by the image of women rebuilding the structure of investment banking to define success on their terms.
Then, maybe April 10th will be just another day.

Sources:
https://www.pay-equity.org/day.html
https://www.cbsnews.com/news/equal-pay-day-5-key-points-about-the-gende…
https://www.huffingtonpost.com/entry/maureen-sherry-opening-belle_us_56…
https://www.americanbanker.com/opinion/women-in-banking-tackling-the-ge…
https://money.usnews.com/investing/articles/2016-04-28/lessons-from-7-w…
Selling Women Short: Gender and Money on Wall Street, Louise Marie Roth
https://www.theatlantic.com/education/archive/2017/02/the-ivy-leagues-g…
https://www.usatoday.com/story/money/2017/01/18/jpmorgan-paid-dozens-wo…
https://news.efinancialcareers.com/uk-en/238353/women-in-finance
http://www.businessinsider.com/wall-street-bank-diversity-2015-8
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