Revealing Root Causes: What Keeps the Glass Ceiling in Place in the Financial Sector?

So many talented women entrepreneurs with great technology business ideas cannot raise the capital needed to start their businesses from Silicon Valley investors. Likewise, many women in Wall Street firms cannot make partner, or otherwise advance, no matter how well they perform. Even with lots of publicity, such as the recent gender discrimination lawsuit against Kleiner Perkins Caufield & Byers, programs put in place to help women advance, diversity programs on unconscious bias, and millions of dollars spent to settle class-action gender discrimination cases, not much has changed on Wall Street for women. What keeps the glass ceiling in place? New research reveals some root causes that could open pathways to change.

Silicon Valley Venture Capital Firms

Let’s be clear. Only 1 percent of the ideas pitched to venture capital firms get funded. The problem is those that get funded are overwhelmingly pitched by white men. Claire Cain Miller of the New York Times notes that of the people who get investment funding to start new businesses, 1 percent are black, 8 percent are women, and 12 percent are Asian, according to data from CB Insights. Here are some of the underlying structural causes of the problem:
  • Men make up 94 percent of partners at venture capital firms, and the business is insular. Miller notes that most investors accept pitches only from entrepreneurs who come through an introduction via their personal networks.
  • Venture firms with female partners are three times more likely to invest in a company with a female chief executive—but a Babson College study found that just 6 percent of partners at venture capital firms are women.
  • Miller cites a 2014 study published by the National Academy of Sciences, which found that investors prefer pitches by men (68 percent), particularly attractive men, to those by women (32 percent), even when the content of the pitch is exactly the same.

Wall Street

Maureen Sherry, reflecting back on her career as a managing director at Bear Stearns, looks at the current statistics for women at Wall Street investment banks and notes that very little has changed, despite hundreds of millions of dollars paid out to settle gender discrimination suits—most recently $46 million paid out by Morgan Stanley and $39 million by Bank of America. She cites a 2015 Bloomberg Businessweek survey that tracked MBA graduates from 2007–2009, which found the following:
  • While women received almost the same pay upon graduating, six to eight years later their pay averaged 20 percent less than the pay of their male classmates.
  • Female graduates of Columbia Business School, who went to work primarily for Wall Street financial institutions, earned 40 percent less than their male colleagues.
Sherry reveals a very interesting root cause for the Wall Street glass ceiling:
  • New employees are required to sign a U4 arbitration agreement “that binds a worker to settle any job dispute with her employer in-house,” usually with arbitrators chosen because they are friendly to the bank. Not surprisingly, roughly two out of three cases are decided in Wall Street’s favor.
  • When settlements are awarded, the employee must sign a nondisclosure agreement, and the stories and patterns of discrimination remain hidden from the public.


Maureen Sherry states unequivocally that mandatory arbitration needs to be banned so that action, in the form of laws, regulations, and public pressure, can be taken to change the culture of Wall Street. As long as the stories and patterns stay hidden, and the deep-pocketed banks barely notice the settlement payouts, there is no incentive to change. As for venture capital firms, we must keep the spotlight on their insular and discriminatory practices and assert public pressure for them to be more inclusive. Bringing these root causes into the open will help us all know what to look for and how to bring pressure for change.   Image courtesy of Ambro at]]>

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