Would The Financial Crisis Have Happened If More Women Were In Charge?

As we’re all trying to figure out what went wrong in our banking system to cause the recession we’re in, we’re blaming just about anyone and everyone involved, especially the men at the top. Yes, I said the men. Not many of the folks getting blamed on the news are women, so it leads us to wonder, would we be in this position if there had been more women leading the banking industry?

German news magazine Der Spiegel interviewed Mary Ellen Iskenderian, the president and CEO of Women’s World Banking, an international micro-finance organization, and she addressed this. While she didn’t come out and say the recession wouldn’t have happened if women were in charge, she does say the story line might have played out differently…

There’s such a body of literature and research now looking at better decisions being made by more diverse groups of people around the table. Men are almost hormonally programmed to take more risk which is great in boom cycles and they’re going to have outsized returns, but women are going to provide much more stable returns over a period of time. I’ve been in so many groups where, when you have a critical mass of either women or persons of color or something other than the dominant white male hierarchy, you just get another take on the subject.

It’s nothing new that diversity can help any organization by introducing a variety of viewpoints to an issue, but Iskenderian suggests that getting more women in the banking industry might have altered the events that have led us to where we are. If we were in a race with men to make the most money, guys would be the hare and we would be the tortoise. Would we have as much money? Maybe not, but we’d know we probably wouldn’t lose very much if something did go wrong because we wouldn’t have gambled so much. We’d slowly but steadily acquire wealth, according to this theory, rather than quickly advancing, then losing ground.

Part of the reason that micro-finance loans largely are made to women, rather than men, is because women reinvest back in the family, Iskenderian said. “I saw a back-of-the-envelope calculation that something like 20 cents of every dollar in a low-income household is spent on gambling, prostitution, alcohol and sugary soft drinks,” she said. “And you probably know which member of the family is spending money in that way.”

While women have a reputation for getting into enormous credit card debt and mismanaging money, it seems that our innate dislike of gambling resources makes us better with the stuff overall (of course, there are certainly exceptions). Some studies and schools of thought disagree with this assumption, but at least one industry beyond micro-finance concurs. Why do you think women pay less for auto insurance despite a reputation for being bad drivers? [Der Spiegel]