There were more men called David and Steve running FTSE 100 companies in 2018 than there were women and ethnic minorities in similar roles.
A year later, it was revealed that investors in UK funds were more likely to have their money managed by a guy called David or Dave than a women.
I take away two key things from that information.
- One: parents need to be a bit more inventive when it comes to naming their sons.
- Two: that’s phenomenally depressing.
Shake things up
The higher you climb a tree, the fewer branches there are to stand on.
Eventually you get a bottleneck where there is literally nowhere for someone to advance unless a person higher up steps down (or is pushed out).
But this is where the Central Bank of Tanzania has come up with an interesting solution – impose a term limit.
In an effort to “promote and maintain public confidence in banks and financial institutions”, chief executives will only be permitted to spend 10 years in the role before being forced to step down for a minimum of three years.
Under the context of the Banking and Financial Institutions (Corporate Governance) Regulations 2021, ‘financial institution’ refers to a company ‘engaged in the business of banking’; so the scope is quite narrow.
Tanzania is also a small, developing financial services market and has only imposed the term limit on bank CEOs – but, taken as thought experiment, it does open up some interesting avenues to explore.
Could a similar idea work in more developed financial centres? And in a broader range of senior roles?
The upper echelons of financial services firms tend to be fairly stable – provided things are going well, that is.
Take JP Morgan as an example, Jamie Dimon has been chairman and chief executive since 2005. Larry Fink has been at the helm of BlackRock since he co-founded it in 1988.
Why rock the boat?
As long as a company is in good shape, hasn’t been hit with scandals and is delivering for shareholders and employees, there is very little incentive to undergo any significant changes at the top.
But, drawing on the examples at the top of the article, the senior people within financial services who are making the decisions and steering the course are still predominately white men… mostly called Dave.
Arguably, forcing churn at the top could open roles for people across the gender, race and identity spectrum.
Okay – so there are a thousand and one reasons why mandating a term-limit for senior executives in a financial services company would be challenging.
Just a few examples include the loss of experience, short-term impact on performance, a reduction in the attractiveness of the company as an investment and as an employer, negative impact on the share price.
But the ‘governance’ element of ESG is growing in importance and relevance.
People in power rarely cede it willingly. But forcing companies to think longer-term about their senior leadership strategy and curbing the length of time someone can sit in a top job might be the only way to get broader representation in financial services companies.