A report by the World Economic Forum in 2010 found that only 2% of CEOs in finance and insurance companies were women. This simple observation prompts a question: to what extent did culturally ingrained gender roles and stereotypes affect the precipitation of the economic crisis that shattered the world’s economy in 2008? Put another way, did the male domination of the C-suites in these industry sectors contribute to the crisis?
The answer to that question has deep implications for the need to increase the number of women in financial leadership positions.
Irene van Staveren recently published a study on the Lehman Sisters hypothesis in which she concluded that gender poses an obstacle to the advancement of women to high-ranking leadership positions at financial or risk management institutions. She further concluded that when they do achieve such positions, women perform measurably better than their male counterparts.
The reason for this enhanced performance, particularly in crisis situations, van Staveren posits, is the tendency among females to adopt a more conservative and risk-averse posture. A paper presented at the 25th Australasian Finance and Banking Conference in 2012 backed up this assertion, finding that banks with female CEOs held more conservative levels of capital after controlling for the bank’s asset risk and other attributes. Furthermore, while neither CEO nor Chair gender is related to bank failure in general, the paper found strong evidence that smaller banks with female CEOs and board Chairs were less likely to fail during the financial crisis.
Looking at this research prompts a question eloquently asked by Harvard professor Rosabeth Moss Kanter, As she watched the film Inside Job, a documentary about the financial crisis directed by Charles Ferguson, an equation formed in her mind:
more women [in the financial sector] = less self-interested greed = less imprudent risk = more solid asset values = healthier balance sheets.
Would closing the gender gap to increase the number of women financial leaders improve financial institutions and prevent further damage to the global financial system?
This question is behind a study recently launched by Hazel Hollingdale, Ph.D. candidate in Sociology at the University of British Columbia, Previous studies have found that, in general, women are more risk-averse and fiscally responsible than men. Hollingdale will focus specifically on the financial industry to find out if these findings apply to women in that sector. She will also examine whether macho behaviours often rewarded in male-dominated sectors – such as taking unnecessary risks and being overly independent – can also be found in the financial industry.
These questions and a growing body of research are, at the very least, food for thought. Increasing the number of female executives and leaders in the financial sector may not simply be a matter of diversity. It may be one of the keys to preventing a future financial crisis.
Does this idea resonate with you? What have you seen at your organization? What, if anything, is your organization doing to support women moving into more senior roles?
Further Reading
“Are Female CEOs and Chairwomen More Conservative and Risk Averse? Evidence From the Banking Industry During the Financial Crisis” – http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2136978 – Palvia et al, 25th Australasian Finance and Banking Conference 2012, March 14 2014
“Would Women Leaders Have Prevented the Global Financial Crisis? Implications for Teaching about Gender, Behavior, and Economics” – Julie A. Nelson, Global Development and Environment Institute, Working Paper No. 11-03 (September 2012) – http://www.ase.tufts.edu/gdae/Pubs/wp/11-03NelsonWomenLeaders.pdf