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Why We Need More Senior Women Leaders in Tax

It's hard to ignore the mounting evidence that more gender-balanced leadership teams correlate with better business performance -- and the tax profession is no exception.
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It's hard to ignore the mounting evidence that more gender-balanced leadership teams correlate with better business performance - and the tax profession is no exception. Some intriguing research suggests that companies with a critical mass of women in top financial and leadership roles are less prone to engage in tax evasion or accounting fraud. Other fascinating studies explore the different ways women and men assess risk and make decisions. Not to suggest that one way is right and one is wrong, but diversity leads to balance, and balance - particularly when considering risk - is just smart business.

Tax strategy today plays an increasingly important role in business strategy with significant implications for companies' growth, investment, and talent agendas, giving chief tax officers a more prominent seat at the table in strategic decision-making. Top tax advisors are also dealing with more strategic issues than ever before, helping clients navigate the complex landscape of tax policy and regulations that impact business performance and reputation internationally. Heightened scrutiny of tax structures used by some companies to minimize taxes has also raised public awareness around issues of taxation and corporate responsibility. With tax executives playing a more critical and visible business role, tax is likely to become an increasingly important avenue to top leadership positions in more companies and more diversity is needed.

According to the World Economic Forum's Global Gender Gap Report 2014, it will take until 2095 to completely close the gender gap for economic participation and opportunity. A significant portion of that gap is caused by a lack of women in leadership positions.

In my 30 years with EY, I have witnessed significant progress for women in the tax profession, both within our firm and among clients. According to a recent industry research report, more than half the people entering the tax profession in the US today are women. This is a major increase from just five years ago, according to this research, when women made up only 35% of tax professionals in corporate positions and public accounting. There have been steady gains among women in mid-level tax management positions, particularly in public accounting firms where we see near parity with men. Moreover, at the IRS, approximately 70% of tax examiners, collectors, and revenue agents are women, the above industry research found.

Despite this encouraging progress, the outlook is not nearly so positive if we look at the most senior tax positions. More than 70% of tax partners in public accounting firms and heads of corporate tax departments are men. However, it is inspiring to see that the situation is reversed in the largest US companies: at seven of the 2014 Fortune 10 companies (Walmart, Berkshire Hathaway, Phillips 66, GM, Ford, General Electric, and Valero Energy), the top tax jobs are held by women, our research found. In fact, the percentage of women at the executive level is higher in tax than in any other function at these leading companies.

This is a big deal. While numbers aren't everything - when was the last time you heard a tax professional say that? - the fact that we now, for the first time, have a critical mass of women in tax executive positions at some of the largest global companies suggests that we may be nearing a tipping point. Though a lot of attention is focused - and rightly so - on the still tiny percentages of women in CEO and COO positions in major US companies, our research points to tax as a potentially under-explored and under-appreciated gateway for women to the ranks of executive management.

To be clear, despite this potential entrée to management, there is still a long way to go to get to real parity. Looking more broadly at the Fortune 50 companies, the representation of women in chief tax officer roles varies significantly across industries. EY found that while women hold some of the top spots in the oil & gas, automotive, and retail sectors, they are largely absent among technology, healthcare, and financial services companies. And women aspiring to top leadership positions in tax are certainly not immune to the challenges of pay equity, gender bias, work-life integration, and glass ceilings faced by women throughout corporations. Yet we should take the positive developments at some of the world's largest companies as a hopeful sign and a call to further action.

We need a deeper understanding of both what's driving this surprising success and what's holding us back. There are a number of tailwinds blowing in the direction of change. Demographics are one. Hiring for senior tax positions, as in every corporate function, is likely to accelerate as baby boomers occupying these top spots begin to retire. As these positions turn over, the pool of talent from which to fill these executive roles looks vastly different today than it did even a decade ago.

There is also the potential for women in tax leadership roles to create a lasting legacy of opportunity and acceptance for others. To take just one example, when Claire Babineaux-Fontenot, former head of tax at Walmart, was promoted to EVP and Treasurer at the company she was shortly thereafter succeeded by Lisa Wadlin as SVP and Chief Tax Officer. Those of us who have attained leadership positions in the field can use our hard-earned influence to cultivate and sponsor the next generation of women leaders. For me, the opportunity we have created for talented women to be promoted to partner, principal, or executive director in our firm's tax practice in increasing numbers has been one of the most personally rewarding features of my career.

We need to keep building on the momentum we see today to establish tax as a gateway for more women to head of tax, CFO and, eventually, CEO positions. It's up to us as a profession and as a society to make it happen and research shows more diversity will lead to better business outcomes.

The views expressed are those of the author and do not necessarily reflect the views of Ernst & Young LLP or any other member firm of the global Ernst & Young organization.