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The protracted global financial crisis has led to a wide-ranging search for culprits, including blind regulators, greedy speculators, Chinese dumping, and a global market economy that lacks both a social and time horizon. But could it be that deeply rooted misbehavior in trading and board rooms can be explained by “animal spirits,” or what Keynes called a spontaneous urge to action—albeit in the wrong direction? Could it be that male domination of market finance results in excessive speculation and risk-taking at the expense of global stability? Testosterone, rather than neurons, may push male egos into ever-more-complex speculative bets, a gambling binge made possible by advanced technology, mathematical techniques, and globalization.
It’s well established that male managers tend to focus on fast, short-term abstractions, while females place more importance on the long-term social and ethical dimensions of management. Research by Carol Gilligan illustrates that women have a different kind of moral voice than men—a voice of connection and caring vs. the male belief in abstract justice. A recent study at the University of Chicago Booth School of Business shows that gender differences in financial risk aversion have a biological basis and affect economic behavior.
Women also remain underrepresented in leadership positions. A 2010 European Commission study noted that none of the governors of European Union central banks were women and that 82 percent of the key decision-making positions were filled by men. Among the largest companies listed on European stock exchanges, 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 imposed to force equality.) And on the Financial Times‘s 2010 and 2011 lists of the top 50 women in world business, fewer than 20 percent worked in the financial services sector.
A few noteworthy exceptions spring to mind, including Anna Botin at Banco Santander (STD), Christine Lagarde at the IMF, and Wu Yi, China’s highly respected former Vice-Prime Minister of Finance. But the overwhelming and disturbing truth is that global finance is both male-dominated and sick. Perhaps it’s time to turn “the old boy’s club” inside out and select women to direct the financial sector. It could make for softer landings. The German Family Minister has proposed a quota of 30 percent women for higher-level management 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 appropriate target. Like most “peripheral” European countries, France is light years behind, as regards gender equality.
All in all, a two-fold rebalancing is urgently needed. First, the academic world must put greater emphasis on grasping the institutional and structural dimensions of the financial markets, instead of continuing to teach Pavlovian finance based on obsolete technical tools. (This requires putting such subjects as compliance, regulation and law, financial crisis analysis, economic intelligence, psychology, and ethics on the front burner). Second, a gender rebalancing in business might well result in better risk management and lower volatility. The sustainability of market finance would improve. And a better work ambiance in the office would be an additional benefit.