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Women in finance face more severe punishment than men

Women sitting on stairs after being fired

In the financial industry, gender disparities extend beyond the well-documented discrimination in pay and hiring decisions to the severity of consequences for wrongdoing, according to an ongoing study.

Women are 20 percent more likely than men to lose their jobs and 30 percent less likely to find new positions within one year following an incident of financial misconduct, according to “When Harry Fired Sally: The Double Standard in Punishing Misconduct,” by Mark Egan of Harvard Business School, Gregor Matvos of the University of Texas-Austin and Amit Seru of Stanford Graduate School of Business.

The researchers analyzed employment data from the Financial Industry Regulatory Authority covering 1.2 million registered financial advisors between 2005 and 2015.

“We could look at two advisors — a man and a woman — who work for the same company at the same time and both engage in financial misconduct at the same time, and do an exact comparison,” Egan recently told Harvard Business School’s Working Knowledge.

When researchers dug into the data to look for a reason for the harsher punishments for women, they were able to find only one plausible explanation — discrimination.

The researchers explored the possibility that women’s behavior could be justifying the disparity — that they could be committing more frequent or severe misconduct than their male counterparts — but the data showed just the opposite. Men are two times more likely than women to be repeat offenders, and on average, offenses by women are 15 percent to 20 percent less costly than offenses by men.

“It actually looks like women are engaging in less severe types of misconduct,” Egan told Working Knowledge. “If anything, we would expect to see women less likely to be punished.”

The researchers conclude that discrimination by male employers is the most likely explanation for this discrepancy. “Women are getting less benefit of the doubt and have a shorter leash compared to comparable male advisors,” Egan said.

The study's findings cannot be explained by career interruptions, productivity differences or experience. And the discrimination results — both the likelihood of loss of employment and the difficulty of finding a new job — are greatest in regions of the country with large wage gaps and labor force participation differences between men and women, the researchers found.

Firms with more female executives are less likely to show differences in the severity of punishment across men and women. When one-third or more of a firm's executive team is made up of women, there is no evidence of punishment differences between female and male advisors.