Would Women Leaders Have Prevented the Global Financial Crisis?

Some have asked whether things would have turned out differently if Lehman Brothers investment bank, which went so spectacularly bankrupt, had been Lehman Sisters, instead. Would having more women in leadership positions in finance naturally lead to a kinder, gentler, and tidier economy?

While there is an important gender angle to the financial crisis, it is not about differences in traits that men and women presumably “bring with them” to their work. In a recent paper, I discuss how low-quality behavioral research and associated media hype have caused a resurgence in stereotyped thinking about men’s and women’s financial behavior and attitudes towards risk. Yes, men and women are different, but we are not nearly as different as those literatures would have us believe.

The crucial gender angle has to do, instead, with the sorts of behaviors we have come to believe are acceptable—or even inevitable—in the realms of business and finance. Commerce is often imagined as an essentially masculine sphere of activity. Not only are men envisioned as the naturally-suited participants, but it is also masculine-stereotyped behaviors, motivations, and skills that are most expected. Participants in commerce are assumed to be aggressive, risk-taking, competitive, achievement-oriented, and self-interested. On Wall Street, the language of “Big Swinging Dicks” and “Boom Boom Rooms” just makes this a bit more obvious than usual. The rise of complicated financial derivatives and computerized trading on Wall Street also valorized the nerdy math-geek, who, again, is archetypically male. The orthodoxy within academic economics reinforces these images by promulgating an image of markets as self-regulating machines whose energy source is the self-interest of rational “economic man.”

What is left out? In the hyper-masculine image of the marketplace, social interdependencies and ethical responsibilities have no place. Note that the counterpoint to the archetypal competitive, aggressive male is the archetypal nurturing, motherly female. When caring for family members or working in fields such as nursing, people are assumed to manifest a quite different set of behaviors, motivations, and skills. People are then assumed to be careful, protective, cooperative, emotional, and altruistic, to exude interpersonal warmth. These behaviors, being so different from those of “economic man,” are often referred to as “non-economic”—or even, because they do not follow from the dictates of self-interest, as “irrational.” This assumed separation of the economic from the social and ethical comes at a high cost. As I discussed at length in my book Economics for Humans, it leads both to neglect of the social and ethical dimensions of commerce, and to the neglect of the economic dimensions (most especially, the considerable resource demands) of caring labor.

In actuality, emotional and social factors play a large role in workplaces. Specialists in organizational behavior and the psychological aspects of employment relations have long known this, and a few behavioral economists have begun to recognize this as well. Money is important, but people do their best work when they are engaged and inspired, or at least feel valued, recognized, and respected.

In actuality, well-functioning markets demand a great deal of social regulation. This happens through the instillation of cultural ethical norms and the formation of industry standards and codes, as well as through deliberate governmental action. While some amount of self-interest and risk-taking serve a legitimate role in markets, an atmosphere of trust and attitudes of appropriate care and caution are necessary as well. The financial crisis showed us in full force the destructive effects of excesses of greed, opportunism, and a winner-take-all mentality.

The gender aspect of the financial crisis, then, is not about men versus women. There are men who are careful, conservative, and ethical, and there are women who are as risk-loving, driven, and opportunistic as any man. The real problem is that when we conceive of Wall Street as a masculine, testosterone-saturated realm, we not only overlook talented women, we also tend to overlook the value—and the necessity—for everyone of those aspects of life stereotyped as feminine or motherly. It becomes way too easy to denigrate appropriate caution or a concern with ethics as something sissified and weak.

The idea that women would “bring something different” to finance is dangerous both because it exaggerates sex differences, and because it lets men and markets morally and socially “off the hook” for the consequences of careless and irresponsible actions. Efforts to get more women into leadership positions in finance can be welcomed as combating discrimination. But only if valuable traits such as carefulness and concern for others, commonly stereotyped as feminine, become encouraged industry-wide, for both men and women, and reckless and unethical behaviors become frowned upon, will the tenor of financial industry change.