New Banks, New Chances?

Photo: Roberto Stuckert Filho Wikimedia Commons

Two new development banks being set up in China this year have great potential to reap the business benefits of gender equality and diversity. Record numbers of female company managers in BRICS and other Asian, African and Latin American countries could herald a revolution in talent recruitment. However, we may not have reached the point where executives are punished for not meeting gender parity targets, except for in their bottom line, that is.

In terms of purchasing power parity (PPP), China became the world’s largest economy on 10 October 2014, wrote Kaushik Basu, Chief Economist at the World Bank. Yet it has only a four percent voting share in the International Monetary Fund (IMF) despite accounting for more than 16 percent of global GDP and over 19 percent of world population. Stronger economies are able to flex muscles, for instance by creating new financial institutions. The New Development Bank (NDB) and The Asian Infrastructure Investment Bank (AIIB) challenge Western dominance of the World Bank, the IMF and the regional development banks. It is encouraging that the new banks shatter obsolete global power structures and that they can make decisions geographically closer to the people concerned. South Africa will host a regional NDB center and “welcomes the new BRICS bank”.

Keeping up with changes

Analysts told the Weekly Wonk that the new banks may not rival the IMF just yet, but Western leaders are feeling their power base crumble. We are “in a period of transition with important changes in the political and economic relations between east and west and north and south” said Per Øyvind Bastøe of the Norwegian Agency for Development Cooperation (Norad) in a November 2014 blog post. He added a quote by Nobel Prize Laureate Joseph Stiglitz: “We’re in a different world — but the old institutions haven’t kept up.” Against this backdrop, let us look at why it is as important to reject old power structures between the sexes as it is to adapt to a new global economy.

“The highest proportions of women with senior roles are in the BRICS nations -Brazil, Russia, India, China, and South Africa.” Maria Saab, J.D., in TIME

Africa showing the ropes

In 2010 Ngozi Okonjo-Iweala, Nigeria’s Finance Minister, then Managing Director at the World Bank, said at Harvard University: “The big idea is that sub-Saharan Africa is on the verge of joining the ranks of the BRICs.” That is 50 countries whose growth both economically and in terms of women’s leadership may outdo Western Europe and North America. The will to promote African women into executive leadership is nothing new. In 2002, the African Union adopted gender parity for itself, which led to over 50 percent AU female commissioners in 2003. Nkosazama Dlamini-Zuma who heads the gender-balanced AU Commission wrote today, on International Women’s Day, that the AU has declared 2015 as the “Year of Women’s Empowerment and Development towards Africa’s Agenda 2063.” Contrary to the African Union, the 28-member European Union Commission has no gender parity rule, never had a female president and has 19 male and nine female members.

African trailblazers

South Africa, where Dr. Dlamini-Zuma comes from, has a higher proportion of women on company boards than the US, according to Harvard Business Review. Adding to leaders including Ngozi Okonjo-Iweala are Geraldine Fraser-Moleketi, the African Development Bank’s Special Envoy on Gender; Phumzile Mlambo-Ngcuka, Executive Director of UN Women; Winnie Byanyima, Executive Director of Oxfam International; Nyaradzayi Gumbonzvanda, General Secretary of World YWCA and AU Goodwill Ambassador for Ending Child Marriage; and Charlotte McClain-Nhlapo, Disability Advisor for the World Bank Group. These leaders are amplifying their voice by using social media including Twitter to hold wayward peers’ feet to the fire.

Rwanda as role model

Africa’s economy has had more than five percent annual growth in the last decade, reported The Economist in January 2015. It has probably not escaped African leaders that high gender equality score, prosperity and peace often coincide. Rwanda has the world’s highest proportion of women in parliament (63.8 percent) and is friendlier to foreign investment than Italy, according to the same Economist article. The Nordic countries occupy the five top places in the 2014 World Economic Forum’s Gender Gap Report. Rwanda is in seventh place, as the highest-ranking African country. Reading from the bottom, the five countries with the worst gender gaps are Qatar, Yemen, Oman, Kuwait and Iran.

The EU website about gender justice advocates for gender balance in decision-making in companies and member countries, without mentioning any plans to overcome the EU Commission’s preference for male commissioners.

Look to China

As the global economy shifts, evidently so does the composition of business management. According to Grant Thornton International Business Report, the share of women among company senior managers in China jumped from 25 in 2012 to 51 percent in 2013. This is the highest number the world has seen. Prof. Hiromi Ishizuka at Sanno University notes in her study of gender in management in Japan, South Korea and China that China has a high share of female full-time employees, too. Grant Thornton’s 2014 report found Chinese women to make up 38 percent of senior managers. Suggested reasons for China’s high score include the focus of socialism on equality, as well as the one-child policy, which lowered the childcare burden, and rapid urbanization. Might there be a connection between China’s economic win and gender parity? If so, it is the biggest, but not first country to gain from women’s leadership and formal employment.

Russia takes the lead

Russian women make up 43 percent of senior managers, up from around 15 percent in the beginning of the 2000s. The BRICS average was 32 percent in 2014, according to Grant Thornton. The United States has 22 percent of senior positions filled by women, marginally lower than the European Union’s 23 percent. Globally, women hold 24 percent of such positions. According to Fortune in January 2015, there are 25 female CEOs at Fortune 500 Companies in the U.S., which is five percent.

India is not like other BRICS

Why are women in emerging markets becoming business leaders faster than those in high-income countries? Increased investment in women’s education is a major catalyst, wrote Maria Saab, J.D., in a TIME opinion piece last year. In 1980, the female tertiary education participation ratio in China and India was less than 40 (for every 100 males), but has now climbed to 111 in China and 78 in India, according to Grant Thornton’s 2014 “Women in Business Report”. The same report points to the low ranking of patriarchal societies when it comes to women in senior management: India and the United Arab Emirates have 14 percent, and Japan nine percent. Brazil has 22 percent female senior managers.

Economies in Eastern Europe (37 percent) and Southeast Asia (35 percent) lead the way on women in leadership, according to the 2014 Grant Thornton International Business Report.

What about the ambitions?

Women with higher education in the BRICS countries are more ambitious than comparable women in high-income countries, reported Sylvia Ann Hewlett and Ripa Rashid in their book “Winning the War for Talent in Emerging Markets: Why Women are the Solution.” Of female interviewees in India, 80 percent said they were aiming for a top job. The figures for Brazil and China were over 70 percent, while only 36 percent of highly qualified American women said they wanted to advance to the top. In Russia, 86 percent of women aged 18–23 were in tertiary education, as opposed to only 64 percent of the men. May we assume that women in BRICS countries sharpen their CVs when the new development banks soon look to fill new management jobs? Might some of 25 most powerful women in the Asia-Pacific region or notable women in their networks or from other parts of the world receive a call? Development Banks need many economists and often recruit from the private sector, including banks. Bios of managers at the World Bank illustrate this.

Gender paradox

Norway, my own small country (pop. five million), tops a 2014 Catalyst list of the highest share of female company board members in the world, with 35.5 percent. Women make up 40 percent of public limited company boards, as required by law since 2003. Higher numbers of women have made board work more professional and global, said Olaug Svarva, Managing Director of Folketrygdfondet, the largest domestic-focused investment fund. However, are Nordic women as numerous among CEOs as they are in parliaments and the workforce? The answer is no. Maria Saab, J.D., outlines this paradox in a June 2014 Time article: None of Norway’s 35 companies with market capitalization over 10 billion USD have a female CEO. Bisnode wrote that women head only 3.1 percent of Norwegian publicly listed companies, while 6.6 is the percentage in Sweden.

Unpopular career women

Women are almost never chairpersons of Norwegian boards, wrote Ragnhildur E. Arnórsdóttir from Iceland in her master’s thesis. A Norwegian study published in March 2015, found that men do not like career women. Researchers tested the popularity of imaginary professionals, using identical qualifications except for a typical female and male name. The findings mirrored those of the often quoted “Howard/Heidi” study at Harvard Business School in 2003, and two more in 1999 and 2004 by scholars at other U.S. universities. Back in Scandinavia, Curt Rice is Professor at the University of Tromsø and head of Norway’s Committee for Gender Balance and Diversity in Research. Dr. Rice was fuming in his blog response to a claim by Tom Colbjørnsen, Director of the BI Norwegian Business School, that “women haven’t been discriminated against, they just haven’t been qualified. That’s why it’s taken so long to reach a critical mass of women in business leadership.”

Perhaps the explanation for women’s slow career ascent lies in Laura Liswood’s observation below. She was plenary speaker and had an 800-person crowd roaring with laughter (me included) at the Women’s Forum for the Society and Economy in Deauville, France in 2006:

“There is no glass ceiling, just a thick layer of men.”

Laura Liswood, Secretary General of the Council of Women World Leaders

Discrimination at a cost

Twenty years ago, the UN ranked Canada first for its level of progress toward gender equality, but that progress has nearly grounded to a halt, laments The Canadian Centre for Policy Alternatives (CCPA) 2014: “At the current rate of progress, Canada will not close the gender gap until the year 2240.” The CCPA estimates the gender gap to cost the Canadian economy in excess of $145 billion annually, a figure equivalent to ten percent of the national GDP. The Globe and Mail wrote that the share of Canadian women in senior management grew by just 2.3 percent between 1993 and 2013.

New banks grabbing the opportunity?

What strategy will BRICS and other member states use when they recruit talent for the new development banks in Beijing and Shanghai? Will they abandon the traditional male focus of executive searches for development banks? Executive search companies exclude women, wrote Melissa J. Anderson in a March 2014 piece in The Glass Hammer. Finding the next boss may not necessarily need a company’s help, according to Michael Ensser of Egon Zehnder. At WINConference in Berlin, October 2014, (slide 28) he enlightened the audience of 750 mostly women:

“Careers are still made during a pee in the gents’ toilet.”

(Quoting what he said a manager had told him.) Michael Ensser, Managing Partner, Egon Zehnder

The above quote comes from a Western perspective. It may have no bearing on the recruitment realities of the new BRICS and Asian development banks.

Winners in Latin America and the Caribbean (LAC)

One Latin American and two Caribbean countries have sailed past all others when it comes to the share of female managers, according to a study the International Labour Organization (ILO) released in January 2015. Jamaica, Colombia and Saint Lucia top a ranking of 80 countries and are the only ones where your boss is more likely to be a woman, writes The Washington Post.

Reasons for the various or conflicting rankings of countries in my article may be that some studies target top leadership levels, while others include all senior managers.

Both men and women in BRICS countries meet rigid gender roles more often than is the case in Europe and North America, according to Sylvia Ann Hewlett and Ripa Rashid.

Why choose diversity?

Will the owners of the new development banks ensure that management and staff reflect society’s composition in terms of gender, indigenous peoples, persons living with disabilities and other groups? “The evidence is growing — There really is a business case for diversity,” wrote the Financial Times in May 2014. Laura Liswood titled her February 2015 article in Harvard Business Review “Women Directors Change how Boards Work”. Ms. Liswood, who is Secretary General of the Council of Women World Leaders, shared findings by Aaron A. Dhir, an associate professor at York University’s Osgoode Hall Law School. Professor Dhir has done extensive research for his forthcoming 2015 book, Challenging Boardroom Homogeneity: Corporate Law, Governance and Diversity

The gains

Professor Dhir identified seven consequences of gender-based heterogeneity for boardroom work, board governance, and group dynamics: 1. Enhanced dialogue; 2. Better decision making, including the value of dissent; 3. More effective risk mitigation and crisis management, and a better balance between risk-welcoming and risk aversion behavior; 4. Higher quality monitoring of and guidance to management; 5. Positive changes to the boardroom environment and culture; 6. More orderly and systematic board work; and, 7. Positive changes in the behavior of men.

Why gender balance in leadership?

More women on boards make businesses more profitable. A number of studies have proven this. If the new development banks are smart and ensure gender balance, they will get more money to spend. Over the past 15 years, the think tank Catalyst has found that the U.S. Fortune 500 companies with the most women board directors (WBD) are the most profitable. Compared with companies with the lowest proportion of WBD, firms with five consecutive years with the highest proportion of WBD had 84 percent more profit from sales, 60 percent more from capital investment and 46 percent more in dividends.

Hard facts

Credit Suisse showed in a global study of 2,360 companies that was carried out between 2005–2012, that those with more women board directors were more profitable. Enterprises with at least one woman on the board, had 26 percent more profits than those with male-only boards, Credit Suisse found. Especially during the financial crisis from 2008 companies with women on the board performed best. The Turkish bank Garanti and IFC found in a 2014 study that companies headed by women were 15 to 25 percent more profitable than those led by men.

Good for women, good for men

In the report “Investing in Women’s Employment: Good for Business, Good for Development” from 2013 IFC describes how companies have worked to increase the proportion of women, and the social and financial benefits. Examples from industry and business in Chile, Thailand, Kenya, Ukraine, Vietnam and Brazil document how productivity, satisfaction and profitability has gone up thanks to systematic efforts to hire, promote and retain women. The findings show that what is good for women in the workplace, also benefit men. Examples include transparency and systems ensuring that skills are the deciding factor for employment and promotions; training; anti-harassment policy; childcare; parental leave; and flexible work hours. Thanks to such measures, fewer than before quit their jobs. Finlays Horticulture in Kenya used to recruit executives externally (90 percent of them were men in 2004), which meant costly advertising, recruitment process and training. Finlays calculated that internal promotion of 69 women from 2010 to 2012 had saved the company 200,000 USD (Page 78).

Mriyia, a Ukrainian agricultural company, found that it cost 2.5 times the annual salary of a skilled employee to replace him or her.

“Investing in Women’s Employment — Good for Business, Good for Development, IFC

How to break old recruitment habits?

With the current speed, boards and management groups at for example the World Bank and regional development banks will not see gender balance anytime soon. One wonders if they even want to, and if anyone has been held accountable for lackluster approaches. If top executives have been fired for not keeping word on gender parity promises, it has escaped the press and Google searches. A report by the network ORIGIN from 2010 describes measures and goals for diversity and equality in 14 international entities. The World Bank announced in the report that gender balance in leadership should be reached by the end of 2012, but this has not happened. On 8 March 2015, 14 of the 44 managers featured on the World Bank website are women, which is 31 per cent. When I counted in November 2014, there were 16 women on the list, which had 46 entries.

No African woman among the World Bank’s own leaders

In 2012 The Guardian urged the World Bank to “embrace racial equality and accountability.” This could be why: None of the 14 women in the World Bank’s management team of 44 people is from an African or low-income country. Of the 14 women in management, 12 are from Western high-income countries. A woman from Indonesia (middle-income country) and one from India (also middle income) are the only non-western among the 14. The 32 male managers are also mostly western, however the team has male nationals from China, Egypt, Haiti, India, Japan, Korea, Mexico, Peru, Senegal and South Africa.

Mostly men managing the coffers

Of the 25 Executive Directors on the World Bank’s board, 84 percent (21 persons) are men. The four female Executive Directors include Ana Dias Lourenço from Angola, while the three others are from Finland, Germany and the UK. (The US position has been vacant for a while). Governments decide whom to appoint, and can therefore make an effort to achieve gender balance, if they wish. Most countries have laws or guidelines for equality and obligations under the Convention on the Elimination of All forms of Discrimination Against Women (CEDAW) and other international instruments.

Finance ministers for gender equality

The World Bank’s Board of Governors is its top decision-making body. Mainly finance ministers of the 188 member countries hold the seats. Globally some 23 women are ministers of finance/economy, according to a recently updated overview. In 2013 Ngozi Okonjo-Iweala set up a Gender Equality Community of Practice for Finance Ministers that meets every six months. A boost of its important work could help to fill the huge financial gaps blocking girls’ and women’s advancement globally.

Do the NDB and AIIB have strategies ready?

It is not easy to find analyses of the new banks’ possible attention to gender and diversity issues — which are integral to social and environmental safeguards — in the banks’ internal or external operations. However, my review is limited to texts in English. Gender and diversity analysts in finance circles of NDB and AIIB member states may have hammered out forward-looking strategies in Chinese, Russian, Hindi and Portuguese for all I know.

Safeguards or not for NDB?

Existing multilateral development banks ask borrowers to use safeguards to mitigate harm to communities and the environment. Will the new BRICS bank NDB and the Asian AIIB do the same? Will they mainstream human rights? asked Heinrich Böll Stiftung in October 2014.

Paragraph 26 of the July 2014 Fortaleza Declaration about the new BRICS bank highlights “the importance of bringing gender perspectives to conflict prevention and resolution, peacebuilding, peacekeeping, rehabilitation and reconstruction efforts.” Suzanna Dennis in Population Action wrote in July 2014 that the same Declaration recognizes the importance of sexual and reproductive health (Paragraph 57). Yet, in August 2014, Curtis Chin referred to development experts “fearing that a new BRICS bank will not take as seriously social safeguards implemented with mixed degree at the World Bank, Asian Development Bank, African Development Bank and elsewhere.” He warned about personnel politics, but kept gender and diversity out of the equation.

AIIB safeguards?

Likewise, analysts are critical of AIIB’s safeguards and social standards, taking note of China’s infrastructure lending history and practice in the African continent in particular, reported Don Rodney Ong Junio in December 2014. Again, media coverage in the English language is meager. A tweet from @LendySpires took up the inclusion of women in AIIB in June 2014. According to Reuters, the AIIB’s 20 Asian members plus New Zealand of the Pacific Region aim to finalize the articles of agreement toward the end of 2015.

Member states of both NDB and AIIB are using 2015 to negotiate the terms and modus operandi. Now is the time to make sure they do not refit the blinders that the Bretton Woods institutions have worn regarding gender and diversity.

No magic bullets, but…

One may ask whether safeguards would be as necessary and comprehensive if more managers and employees of development banks represented groups who have the greatest need for development (and consequently much knowledge about what needs to be done). With international recruitment, it is quite possible to find qualified candidates of both sexes or non-specific gender who have their own experience or close contact with excluded groups, in low- and middle-income countries. This applies not least to people living with disabilities. They may have relevant education for top positions at development banks, but nevertheless face obstacles and prejudices as job seekers. Similarly, there appears to be few representatives of indigenous peoples running development bank programs addressing or affecting indigenous peoples. The fight against HIV / AIDS requires close cooperation with infected and vulnerable people and their communities, to find the best methods to prevent spread. Projects succeed more often if people concerned are involved in formulating and leading them, wrote Anju Sharma in January 2014.

It is people who write and carry out policy. Talent searches help to shape organizations. The NDB and AIIB have a golden opportunity to make sure managers and staff reflect the demographic mix of their member states. Everybody wins, right?