Office Hours: Reena Aggarwal on the Progress of Women in Finance

Reena Aggrawal's headshot next to women's history month graphic.

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The finance industry is behind in gender equality, especially in comparison to other professional fields. There remains a prevalent disparity among senior roles in venture capital and private equity that can be attributed to a variety of factors. From its “old boy mentality” to the predominantly male C-suites, many women fear their gender will keep them from achieving the same level of success as their male peers in finance. In light of Women’s History month, Reena Aggarwal, Robert E. McDonough Professor of Finance and director, Center for Financial Markets and Policy, discusses this gaping disparity and recommends steps to help bridge it. 

What progress do you think has been made in recent years towards more inclusivity in finance?

The financial sector needs to make greater strides in progressing diversity, equity, and inclusion. There has been some progress made in areas like banking; however, far less in areas such as private equity and venture capital. The good news is that the issues of diversity and inclusion are finally getting the attention they deserve.

What are the biggest deterrents to women in the field of finance?

Women in finance generally are not satisfied by their careers. There are a number of negative themes associated with finance. For starters, it tends to march in lockstep with an “old boy mentality” — an informal system predominantly occupied by wealthy men with the same social and educational background who help each other get to the top. Other attributes highlight the cut-throat competition and brutal work hours with little to no flexibility. Also, you are not seen as “doing good for the world” if you work in finance.

I would argue that you can “do good” in finance. In fact, well-functioning financial markets and institutions help drive economic growth, innovation, jobs, and wages. By pursuing a career in finance, women are able to foster this positive change. Moreover, the financial sector has been making changes in recent years, but it will take time for perceptions to change. In this vein, firms have recognized the need for a culture change set up from the top.

Why is there such a large gender disparity in financial management and investment services, and what steps should institutions take to close this disparity? 

Firms need to make an explicit commitment to diversity that should be followed by real actions in recruitment, retention, compensation, promotion, and mentoring. All employees, including management, should be measured by these dimensions. Recruitment strategies also should  be reevaluated, and progress should be data-driven and monitored closely over time. 

The biggest payoffs come from having more women in leadership positions at financial firms. Georgetown alumna Mary Erdoes (B’89), CEO of J.P. Morgan Asset & Wealth Management and a mother of three girls, is a prime role model. For the first time ever, we have women leading the Nasdaq and the New York Stock Exchange. 

As we enter Women’s History month, why is it important to reflect on this gap?

The progress made so far is not enough. But there is hope. Research shows that diversity leads to better decision making in an organization. In addition, women are major consumers, including financial services, and this trend will only continue. It makes good business sense to understand their needs and who better to know about this than women.

The nation witnessed the election of Kamala Harris, the first-ever woman vice president of the United States. We have reached a tipping point and need to move with a sense of urgency. 

In the context of equal representation in finance, what gives you the most hope? 

I am cautiously optimistic that more progress will be made in the next 5-10 years than was made in the past 20-30 years. Businesses in all sectors are focusing on increasing diversity in part because their customers, employees, and shareholders are demanding it. 

Career opportunities in finance also are changing, with new fields emerging that appeal to women. We are starting to see a focus on environment, social, governance (ESG) and FinTech in finance. Combining innovation, finance, and entrepreneurship really excites our students.

We hopefully will make progress in the C-suite as well. There are new initiatives being introduced. For example, one of our major exchanges has filed a proposal with the Securities and Exchange Commission to adopt new rules related to board diversity. This would have been unthinkable a few years ago.