Much of the gender equality discourse focuses on the correctness of equal representation of men and women. This is particularly the case when discussing the lack of women leaders in business. Women’s actual achievement and skill becomes a little less visible in the debate. After the economic crisis in 2008 revealed the extent to which Wall Street professionals skated the edge of what was legal and ethically right, sweeping reforms have not been enacted and business is going on as usual. With so many men at the top, as CEOs, on boards, and as traders and analysts, should we ask the question: if more women were involved, could we prevent a future crisis? Women do make up 54% of financial services professionals. The critical place where women could have an impact, in senior management, shrinks to 16%.
“A huge body of research shows that large organizations benefit from diversity. Research also shows that men are more susceptible to overconfidence than women, which can lead to groupthink and reckless risk-taking. Yes, Wall Street’s macho, homogeneous culture persists, even as one after another of the industry’s gods is taken down and the same lessons are learned over and over. “Over three decades, Wall Street became the ideal petri dish favoring risk,” Epprecht notes, “and consequently, favoring men.”
Here are some ways that women could help Wall Street:
- Women are collaborative. In a recent study by McMaster University, female executives made decisions based on what was best for shareholders and were less tied to traditional ways of thinking than their male counterparts.
- Risk Averse. Women are risk averse in many areas, including investing. One study proposes that it is not how men and women perceive risk that differs, but rather, women tend to be more pessimistic about the likelihood of increased gains.
- Judicious decision making. Women will collect information and wait before making a decision. A University of California study looked at investing habits among men and women. Women outperformed men in several different ways. Women were slower to act, preferring to gather information and knowledge before making a decision. Men are quick to trade if they think a stock will lose money. But quick decision making may not be the most prudent, and more trading means more fees.
If risky behavior contributed to the 2008 economic crisis, it is ironic, then, that women bore the brunt of the aftermath. Women are more likely to be laid off during an economic downturn. From a recent Bloomberg article:
“When times are good, intellectual capital is valued on Wall Street,” longtime Wall Street executive Jack Rivkin tells Epprecht. “It is more of a meritocracy. In a downturn, political savvy and connections become predominant.” In an old boys network, women are typically not the ones with the best connections.”
While the current discussions around gender representation in business are correct in that more women in leadership is fair, we are sidelining the most compelling reason more women should have the proverbial seat at the table. Their skill set and approach will increase the success of financial services and could help avoid the practices that led to the Great Recession.