Business Analysis: City career women find glass ceiling firmly intact on their way to the top

The number of FTSE 100 companies with female executive directors actually fell last year

The age-old debate over sexual discrimination in the workplace has been re-opened in New York, where Dresdner Kleinwort Wasserstein is contesting claims by five female employees that they hit their head on the German bank's "glass ceiling" when they tried to advance their careers.

One employee, Katherine Smith, worked in the bank's London office, providing a timely reminder that 30 years after the Sex Discrimination Act was passed in the UK, many ambitious career women are finding it as tough as ever to get ahead in most of the City's biggest firms.

Recent research by Cranfield University revealed that one in five of FTSE 100 companies still has no senior women director. The number with female executive directors actually fell last year to 14, from 17 the previous year, its "Female FTSE" found. Then there's low pay: women can earn anything up to a quarter less for doing the same job as a man does. And just last week, the Equal Opportunities Commission warned that it would take 40 years for women to break into the ranks of the UK's 100 biggest companies.

The reason, according to diversity experts, is because most City firms have failed to make women feel they belong - despite welcoming them with open arms at the university milk rounds. Women do not laugh at the same jokes as men, do not enjoy the same sports as men and do not hang out in the same places as men, which all plays against them when it comes to promotion time.

Susan Vinnicombe, the professor of organisational behaviour and diversity management at Cranfield, a co-compiler of the "Female FTSE", says it boils down to the "sexual dynamics" within organisations. "Promotions have so much to do with who is sponsoring you. Women don't have the same relationships at the top levels as men do." Sarah Rutherford, a diversity consultant, goes further, attributing the sexual discrimination in the workplace to a "macho way of management". She points out that the "numbers game" - all those female graduates who signed up 15, 20 years ago - have vanished. "Where are they?"

Peninah Thomson and Jacey Graham, whose A Woman's Place Is In The Boardroom was published in September, said: "The few women who do manage to reach the top of large companies often feel abraded by the cultures they find there. Women just below the board, who look up at the tip of the management pyramid, often decide not to participate, because the price they will have to pay seems too great."

One senior female investment banker, who advises her employer's executive board on diversity issues, adds: "It is difficult for the new generation of women to find role models because there are a limited number of women at the top." This is largely down to the proverbial "old boys club".

Although the Department of Trade and Industry asked the London Business School's dean, Professor Laura Tyson, to look into this issue two years ago the research by Cranfield shows that little has changed. Alka Bali, a rare senior female investment banker who heads leisure and retail for Close Brothers, said: "There's no doubt it's majority rule. But you just have to deal with that. You have to find your own ways of networking and building up rapport, especially as you get more senior and start trying to win your own business."

The three main areas of contention, according to lawyers involved in anti-discrimination suits, are pay, maternity leave and plain old sexual harassment.

Camilla Palmer, partner at Palmer Wade, a law firm, says: "Half of our sex discrimination cases [which make up 70 per cent of their work] are about pregnancy and maternity leave. Pay is a big issue because the City has managed to get away with any sort of transparency."

This was exactly the gripe of a former media analyst at Investec Henderson Crosthwaite, Louise Barton, who eventually won her sex discrimination case on appeal. She took her employer to court because she claimed she was paid £1m less than her equivalent male colleague over a four-year period and was not awarded bonuses in line with another. In a landmark ruling, the judge said it was up to the employer to prove that discrimination had not in fact taken place, clarifying new burden-of-proof regulations introduced in 2001.

So do legal cases have any impact? Opinion is divided. Norma Jarboe, who chairs Opportunity Now, which promotes the advancement of women in the workplace, says the publicity generated in the courtroom can be a "help and a hindrance". On the plus side, it puts issues on the agenda, but more negatively it can make employers even more loathe to promote women. "Many women have told us that they fear there may be a backlash because employers will feel they are taking too big a risk by putting them in a high-profile position," Ms Jarboe adds.

Then there are the cases that fail, such as Stephanie Villalba's, who lost her record £7.5m claim for sex discrimination against Merrill Lynch in 2004. The US bank managed to argue that the reason she was moved from her post was because she was not good enough. This opens the door to all those male bigots who believe women are too quick to go crying to their lawyers.

One thing the spectre of lawsuits has done is to make big bulge banks takediversity seriously. All will employ a head of diversity and pump as much as £2m a year into training their staff, hiring consultants and funding conferences to improve their images. "Over the last two to three years things have changed dramatically. The emphasis is very strong on communicating that there are no objective barriers to promotion. Most are self-imposed. We have seen progress simply by redressing the balance in terms of the perception in the industry," says the investment banker who moonlights as her firm's "gender champion for Europe".

Not all areas of the City are as bad as each other. While it is rare to see a woman burning the midnight oil on a major deal, females are much better represented in asset management, tax and retail banking. The more flexible the hours, the more female. The flip side is that by demanding long hours, employers can keep women out of some top jobs. It takes a dedicated stay-at-home husband, like that of WH Smith's chief executive, Kate Swann, or Monsoon's Rose Foster, for women to really get ahead.