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It used to be conventional thinking that you retire at age 65. This is the age at which you can begin Medicare. You can also take Social Security then, although the age at which full retirement benefits begin is 66 for those born between 1943 and 1954, rising gradually to 67 for those born after 1959. And you can start receiving permanently reduced benefits at 62. There's also another age to be aware of: 70½. This age triggers the rule that you must begin to take required minimum distributions (RMDs) from both any qualified retirement plans from work [401(k)s, for example] that you own and from any traditional IRAs. (Roth IRAs do not have required minimum distributions in the account holder's
The Women in Finance Charter, an initiative from the U.K. Treasury to improve gender balance in the finance industry, just released its first progress report. Frankly, it makes for depressing reading. But there's a glimmer of hope in one of the remedies it proposes.
Signatories to the charter include asset management firms such as Schroders Plc, banks like Barclays Plc, insurers Aviva Plc and Prudential Plc, as well as the U.K.'s Financial Conduct Authority and the Treasury itself. As of last week, 205 companies and organizations have signed up.
Of the 68 firms that did so initially, only about half increased their proportion of female managers in their first year of membership -- and these, remember, are the companies that cared enough to sign up for the charter in the first place. Less than a third met their targets for the proportion of women in senior management in the first 18 months of the charter's existence. That's poor by any standard.
But the most worrying finding in the data, which was analysed by London-based think tank New Financial, concerns the pace at which the executive suites will have to change their gender balances to meet their self-imposed and not particularly challenging targets.
The average goal of the charter's signatories is for 36 percent of senior managers to be female by 2022. That's up from a paltry average of less than 28 percent today. It's change -- at a glacial rate.
A Low Bar to Clear At 3% a year, companies can reach their target of 36% women in senior management positions by 2022 Source: New Financial
On a compound growth basis, the target is low enough that just maintaining the current pace of 3 percent per year will see enough women joining the executive suite for the companies in the study to meet their 2022 targets.
The charter members need to add 2,300 women to the ranks of senior managers to get to where they promise to be, an increase of 16 percent from current levels. Banks have the biggest shortfall to make up.
One way to speed up the process is already there in the Treasury's charter. Signatories agree to link compensation to progress in meeting gender diversity targets, typically through bonus awards.
Hermes Investment Management, for example, benchmarks its staff against "clearly defined corporate behaviors and values" which in turn form a "significant input into determining annual incentive awards." Columbia Threadneedle Investments scores its senior managers on "how effectively and proactively or otherwise" they have carried out the firm's gender action plan and links their compensation to that performance.
As the report suggests, though, there's still a lot of resistance to basing bonuses on boardroom diversity, which may help explain the poor showing in tackling the issue:
"Linking gender diversity to pay was the most controversial Charter principle, and for many signatories the link appears relatively modest and is one of many criteria used to determine variable pay. But it is already having an impact as a signal to senior staff that improving diversity is a strategic priority."
Signaling clearly isn't enough. Aligning the financial health of executives with their diversity targets -- with meaningful penalties for under-performance -- would be a powerful motivator to do the right thing. It's a blunt weapon, for sure. But the evidence so far suggests the problem isn't going to fix itself. There's no better way for a company to signal to its management that it's serious about getting them to address gender imbalances in their own ranks than by tying compensation to metrics. In the finance industry in particular, money talks -- loudly.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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