Is the Financial Crisis a Male Syndrome? (Bloomberg Businessweek)

With the financial world lurching from one emergency to another, it's time to consider thatdomination by men may foster aggression and risk-taking

   The protracted global financial crisis has led to a wide-ranging search for culprits, includingblind regulators, greedy speculators, Chinese dumping, and a global market economy thatlacks both a social and time horizon. But could it be that deeply rooted misbehavior intrading and board rooms can be explained by “animal spirits,” or what Keynes called a spontaneous urgeto action—albeit in the wrong direction? Could it be that male domination of market finance results inexcessive speculation and risk-taking at the expense of global stability? Testosterone, rather thanneurons, may push male egos into ever-more-complex speculative bets, a gambling binge made possibleby advanced technology, mathematical techniques, and globalization.

   It’s well established that male managers tend to focus on fast, short-term abstractions, while females placemore importance on the long-term social and ethical dimensions of management. Research by CarolGilligan illustrates that women have a different kind of moral voice than men—a voice of connection andcaring vs. the male belief in abstract justice. A recent study at the University of Chicago Booth School ofBusiness shows that gender differences in financial risk aversion have a biological basis and affecteconomic behavior.

   Women also remain underrepresented in leadership positions. A 2010 European Commission study notedthat none of the governors of European Union central banks were women and that 82 percent of the keydecision-making positions were filled by men. Among the largest companies listed on European stockexchanges, only 11 percent of board memberships are filled by females. (The only exception is Norway,where 42 percent of board members tallied by the EC were women, largely due to a 2006 quota imposedto force equality.) And on the Financial Times‘s 2010 and 2011 lists of the top 50 women in worldbusiness, fewer than 20 percent worked in the financial services sector.

   A few noteworthy exceptions spring to mind, including Anna Botin at Banco Santander (STD), ChristineLagarde at the IMF, and Wu Yi, China’s highly respected former Vice-Prime Minister of Finance. But theoverwhelming and disturbing truth is that global finance is both male-dominated and sick. Perhaps it’s timeto turn “the old boy’s club” inside out and select women to direct the financial sector. It could make forsofter landings. The German Family Minister has proposed a quota of 30 percent women for higher-levelmanagement positions (to overcome the pitiful 3.7 percent placement of women in top German management positions today). A 51 percent quota in the financial sector might be a more appropriatetarget. Like most “peripheral” European countries, France is light years behind, as regards genderequality.

   All in all, a two-fold rebalancing is urgently needed. First, the academic world must put greater emphasison grasping the institutional and structural dimensions of the financial markets, instead of continuing toteach Pavlovian finance based on obsolete technical tools. (This requires putting such subjects ascompliance, regulation and law, financial crisis analysis, economic intelligence, psychology, and ethics onthe front burner). Second, a gender rebalancing in business might well result in better risk managementand lower volatility. The sustainability of market finance would improve. And a better work ambiance in theoffice would be an additional benefit.

   Bouchet is a global finance professor at Skema Business School. Isaak is a guest professor of entrepreneurship at theUniversity of Mannheim and co-author of Brave New World Economy: Global Finance Threatens Our Future.

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