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By Benja Stig Fagerland

Shall women save the world’s economy? The financial crisis has spoken, and has shown that the number of women in corporate management has an important effect on share prices. Therefore, the financial crisis leads to a cultural revolution that now favors female leaders, according to professor Michel Ferrary. Other European and American researchers who have followed the financial crisis closely agree, pointing to the importance of diversity in leadership. Several management experts are now asking if it is women who must save capitalism.

“Why can’t a woman be more like a man?” sings Henry Higgins in My Fair Lady. Future generations and my three daughters will certainly turn the question around and ask, “Why can’t a man be more like a woman?” Gender is a business issue and not a women’s issue. In 2008, The Economist introduced the concept of “womenomics.” It is the term for the next economic revolution: that it will be women who save the future of the world economy. In Iceland, women are being widely employed in banks just to clean up. We need new management skills and new views about what a company is and how it should be managed. I am tempted to say: the maids are cleaning up after the big party, while the rest of us sit exhausted with thundering hangovers and a bad taste in our mouths! Women and economic viability

Never before has there been so much focus on the economic importance of women. Our value as consumers, employees and managers is being recognized as an expression of health, maturity and economic viability. Women will have a central role in solving the challenges of the labor market: an aging workforce, falling birth rates and labor shortages. Countries and companies have a strong desire to let women use their potential. We have not yet reached the most powerful positions even though we have a greater presence in business and the world economy than ever: - - - - -

Women account for 80% of consumer spending. Women start 70% of Canadian businesses. More women aged 18-44 are millionaires than men. Women produce 40% of the world’s GNP. Women are expected to own 60% of all personal property in the UK in 2025.

Women also constitute most of the mass of talent: 60% of European and American university graduates are women. Europe could realize 13% growth in GNP just by reducing the gender gap. Companies with more women in top management will outperform those with fewer. Moreover, researchers at Tepper School of Business at Carnegie Mellon University have found that female top executives perform as well as men, and actually earn more. Their study, which followed the career paths and compensation of more than 16,000


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Shall women save the world’s economy? - By Benja Stig Fagerland

executives over a 14-year period, found that female executives actually earned a total of about $100,000 more per year than men of the same age, educational background and job experience. Women are the most powerful engine for growth

Anyone who is not living in a cave is aware that the world is in economic crisis – the worst since the Depression of the 1930s. The press, economists, banks and governments keep reminding us. Major financial institutions have stumbled and are restructuring to become healthier, leaner and stronger. Others have been bailed out or nationalized. Share prices are down 30%-60% around the world. Credit is tight, even after central banks and governments have pumped hundreds of millions (choose your currency) into the markets. The financial crisis is prompting a cultural revolution, and there is no doubt that the economic situation favors female managers. Michel Ferrary, professor of management and HR at CERAM Business School, and director of an institute that studies women’s role in business, looked at the correlation between the proportion of women in management and share prices of 40 French companies. He concluded that the more women in management, the fewer the losses. The survey Women Matter: Gender diversity a corporate performance driver (2007) points in the same direction, and concludes that more women at the top mean more profits. The study was made by McKinsey, a management consultancy, and the Women’s Forum for the Economy and Society, which the Financial Times calls one of the world’s five best forums. The study looked at 89 companies listed on the European exchange EuroStoxx that had market capitalizations of greater than €933 million. Performance was compared with the proportion of women in management between 2003-2005. As Ferrary concluded, the McKinsey/ Women’s Forum study found an apparent correlation. Companies with more women on management and supervisory boards produced an ROE of 11.4%, against 10.3% for the whole group. Where women were wellrepresented on boards, profits grew 11.1%, against 5.8% for the group. Market capitalization rose 64%, against 47% for the group. The study provides strong statistical evidence that companies with a high proportion of women in management achieve the best results. Causality cannot be proven, but the correlation can only speak for greater gender diversity. Male Norwegian managers agree. In connection with the Female Future Project, which I initiated for the Confederation of Norwegian Enterprise (NHO), we carried out a broad study in which managers from every listed member of NHO participated. Our study, presented


Shall women save the world’s economy? - By Benja Stig Fagerland

at the NHO conference “Where is she buried?,” showed that NHO-member company managers see the value of diversity, but experience a lack of female candidates for top posts. Of the managers surveyed, 61% were in total or partial agreement that women in management contribute to better efficiency and quality in the company. 84% of the companies are open to including more women in management and boards if they can just find them. Many factors affect share price. But Ferrary believes 42% of share price fluctuation can be traced to the proportion of women in senior management. Even though the studies conducted so far are careful in their conclusions, Ferrary speculates that one reason may be men’s greater risk-willingness. McKinsey is also cautious about concluding there is causality behind the performance-diversity correlation. Even so, Ferrary speculates the correlation can be explained. “It may be, for example, that men and women have different risk-taking behaviors, with men less, and women more, risk-averse. If management is notoriously over-optimistic and aims for 40% growth in sales, it will make different decisions than a management making a more realistic assessment of future prospects. When markets crash, investors reward companies that have pursued a more cautious investment policy,” says Ferrary.

Foundation, urban women are at a greater risk of poverty than in 1989. According to their figures, 25% of AfricanAmerican or Native American women in New York live in poverty, while only 10% of Caucasian women do. Ana Oliveira, head of New York Women’s Foundation, believes three jobs will disappear from the service sector for every job lost on Wall Street in coming months. On Women’s e-News she said: “The service sector is heavily dominated by low-paid jobs for women. When the economy contracts, low-paid workers especially lose their jobs, and that to a great degree affects women.” Linda Basch, leader of the National Council for Research on Women, is quoted in (October 2008) as saying that women are particularly vulnerable to economic downturns because they are much more likely to be unemployed than men. Women generally make less, with fewer bonuses, and are more likely to work part time. In addition, they have fewer savings and smaller pensions than men. Political critics of the government aid package note that ordinary people – especially women – are forgotten in favor of the financial sector. For the same reason, policymakers should be particularly aware of the rescue plans effect on minority women, says Oliveira.

Women foot the bill for the finance party

It is hard to escape the fact that almost all decision-makers in this crisis are men. All of those who enjoyed fat bonuses while running their businesses into the ground were and are men. Fannie Mae and Freddie Mac were headed by men when they got out of control and made loans to people with low incomes – to people with big dreams who did not know any better. AIG in the US, Northern Rock in the UK, and HypoBank in Germany - all were headed by men. The head of the US Federal Reserve, who until recently was confident banks would regulate themselves, even as they devised and traded ever more complex derivatives, is a man. Many ask if we could have avoided the current crisis if more women managed financial institutions. We will never know for sure, but a few ideas are worth considering. Iceland is a fascinating case study in reckless financial behavior. Banks in this small country went on a decade-long binge of long-term lending, making loans worth many times the national GNP. As the banks went crazy, the politicians (again, all men) slept. Davíð Oddsson, leader of the Icelandic central bank (and a man, of course) is considered to have aggravated the crisis with his decisions and comments. He was a politician, not an economist, and was promoted to this position, let us note, after he retired.

Tammy Wynette sang, “Sometimes it’s hard to be a woman” and, ironically enough, “Stand by your man. Give him two arms to cling to and something warm to come home to.” The two songs are just as contradictory as the role of today’s women and the “bill” many women will pay for the financial crisis. At the same time that many women are giving the crisis “two arms to cling to and something warm to come to,” an icy-breeze is blowing. Women are hardest hit by the financial crisis. The billions of dollars the U.S. government has allocated to the financial rescue plan must be obtained from somewhere. According to Joan Entmacher, an economist at the National Women’s Law Center, an advocacy group, the government will pay for its $700 billion bail-out by cutting programs for people with low incomes. Most of these are women. Experts also point out that the costs of the Iraq War and tax cuts in 2001 and 2003 came at the expense of health programs used mostly by poor women. Despite this official statistic, no government economist addresses what critics call the “feminization of poverty.” At a recent conference about poverty among urban women, held in New York, there was no doubt that the financial crisis will exacerbate women’s already desperate situation. According to a report about the economic status of women in New York state, published by New York Women’s

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Did men create the financial crisis?

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Now, the Icelandic government has hired women to manage the banks, change the culture and tidy up the mess. Elin Sigfusdottir and Birna Einarsdóttir now lead the nationalized banks, Bank of New Landis and New Glitnir – an attempt by the government to go back and start over. Many blame the macho-culture and irresponsible risk-taking for Iceland’s financial meltdown, and it will no longer be tolerated. Iceland’s problems are widely believed to be the fault of aggressive young (and not so young) men who were hungry for generous, immediate bonuses, and who agreed to load their corporate balance sheets with incredibly excessive foreign debt. This risky behavior, which led banks and the country itself over the brink, is now being modified by the new female managers who will ensure more conservative and prudent lending. An example of the economic caution of women is the famous Grameen Bank, the microlender founded in 1983 in Bangladesh. Very quickly, the bank experienced it should get as many women as possible as customers (today, 97%) because women invested the microloans and paid their debt on time. Men, on the other hand, often used some of the money on themselves, and could not repay their debt. A Harvard study published in Evolution and Human Behavior, in November 2008, showed that men with more testosterone took more risk when investing than those with less. Other studies have shown that male investors lose money more frequently than women – worse, men still believe they are better investors. One reason women still do not make as much as men is that women are less aggressive in negotiating salaries. Men take more risks and demand more pay to do it, while women pursue their careers more modestly, and with the organization’s welfare more in mind than a selfish hope of a big bonus at the end of the year. Testosterone can also make you spontaneous, sensation-seeking and danger-seeking and, in extreme cases, euphoric or outright manic. Dr John Coates, author of a Cambridge research study and former manager, said that “an increase of testosterone and cortisol (a “stress hormone”) gives the person a greater willingness to take risks.” Too much testosterone is not a good thing, and I agree. As Collette Dunkley, founder of XandY Communications, a PR agency specializing in gender communication, puts it: “The problem with finance is there is too much thrusting individualism and not enough femininity.” Sorry, guys: This is football, not synchronized swimming!

In the middle of the economic chaos, there is a development that will have consequences for how healthy future


Shall women save the world’s economy? - By Benja Stig Fagerland

companies become. A coalition of leading businessmen (men… that word again), board chairmen (ditto) and managers (all men) of 17 global companies have spoken with one voice on the urgent need for more female and talented managers in business. These courageous and forward-looking men, including the chairmen of BP, Anglo American and Tesco, wrote an open letter in the Daily Telegraph about why it is important to accelerate the glacial pace at which women are entering UK boards of directors. These 17 men believe we must mobilize and include the best available talent, which is more important than ever in this economic climate. “Business leaders have spoken about the need for action on climate change and poverty, and now it is time to do the same for gender,” they wrote. This is the first time since the former Norwegian commerce minister, A. Gabrielsen, introduced legislation requiring 40% of Norwegian board seats be reserved for women. Today, Norway has more female board members than any other country. With this courageous coalition, male business leaders have joined to make a public request to address the gender-inequality issue. It is a welcome and much needed initiative that will certainly help achieve gender balance in a global, safer and healthier financial system to be built. In Norway, in recent years, a politically correct wind has started to rustle the leaves of business. A wind in search of talented women. A wind that can blow a woman unexpectedly into a board room before she knows it. Inside sits a group of male finance types in their 50s, a group that had hoped another “old boy” would join them. They smile, but around the corners of the mouth a small contemptuous and ironical smirk is seen: “We did not choose you because you were the best, but because we had to have a woman. We simply ‘quotaed’ you!” (I can hear them thinking that if they do not even say it). It is now six years since Gabrielsen’s cold wind blew in the door of Norwegian boardrooms and divided Norway into “yes” and “no” camps on the quota question. The panic and chill of six years ago have been replaced by warm relief. Instead of having to make do with quota-induced talent, the boards have been able to rid themselves of their weakest (male) directors and introduce top-qualified and motivated (female) talent. Spain has passed a similar law; within seven years, companies must give four out of 10 board seats to women. In Germany, Angela Merkel’s government is moving in the same direction, introducing a voluntary charter committing to equality. In the Netherlands, the same obligation to put women at the top is in place. And it is not just in business that women are storming the barriers. In otherwise traditional Spain, Prime Minister Zapatero captured the national mood and revealed a cabi-


net with more female than male members, including a pregnant defense minister. Studies show that women are more wary of risky investments and trade than men and that women produce better long-term results. For example, Hedge Fund Research’s Diversity Index indicates that hedge funds managed by women (a small minority of the total) make far better returns annually and consistently over time. According to Lamia Walker, deputy director of the Center for Women in Business at the London School of Economics, it is not about women not wanting to take risks. Instead, she believes men and women reach for different management tools, which helps create more effective organizations and more, different bottom-line results. Both the McKinsey study referred to earlier in this article and research by Alice Eagly, an American psychologist, show that women have a more varied management style and use a broader range of management tools than men. Female managers typically point to techniques such as group decisions and mutual inspiration, while men typically point to decision-making on their own and command and control. A broad range of management techniques can help bring greater flexibility, which in turn means that companies more easily adapt to new situations, according to Walker. We must focus on long-term value creation and we need more solid financial management. Last year, Library House found that 600 venture-backed European companies run by women all produced higher revenues with less capital. A Creditsafe study found that companies managed by women, and companies with both genders on the board, paid creditors and collected from debtors more quickly than companies managed by men. The icing on the cake: women-led firms had better cash flow. Anyone up for having your cake and eating it? All this and more indicates more gender balance is good for companies. Brooke Harrington, author of Pop Finance, examined the returns produced by investment clubs whose members were all women, all men, or a mix. Harrington noted that men selected work-related shares, while women selected consumer-related shares. As a result, mixed clubs had more diverse portfolios – and turned out to be the best performers. I think it makes sense, because it is football, not synchronized swimming, we should be practicing and playing. Women clean up credit card payments without coverage

How can a more feminine approach to business avoid disaster? With the many clear consequences of this financial crisis, many have already noted that a more feminine approach to business could be crucial in avoiding future crises. Several countries are now bringing women in to

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”The panic and chill of six years ago have been replaced by warm relief. Instead of having to make do with quota-induced talent, the boards have been able to rid themselves of their weakest (male) directors and introduce top-qualified and motivated (female) talent.”

clean up the mess that men have made in financial institutions. Nadereh Chamlou of the World Bank said, “the current economic and financial crisis gives us the opportunity to insert gender into the re-writing of the rules. We need new people at the table — people who are not associated with the past.” The idea that women are reasonable and cooperative, while men are competitive and aggressive, has been around ever since Fred Flintstone threw Wilma over his shoulder. Some believe that women are more emotionally intelligent than men. In The business case (Palgrave, 2005), Peninah Thomson and Jacey Graham quoted a British CEO, who said “[Women] have less ego, less positioning. We are all human children. Boys are boys. Women bring calm and objectivity - not always, but generally, women are calmer and less aggressive in positioning themselves.” This attitude is prevalent in the upper layers of some businesses. Niall FitzGerald, deputy chairman of Thomson Reuters says, “There is a feminine approach to leadership, which of course is not limited to women. It’s about being intuitive and rational. It’s about multitasking, sensitivity to people’s needs and feelings and

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being a generous listener.” In fact, claims FitzGerald, an organization must be able to inspire if it is to transform itself and its leaders, and this is possible only if a manager “attaches” himself or herself emotionally to his or her followers, and shows self-awareness, openness, integrity and authenticity. What conclusions can we draw when it comes to men and women’s different attitudes to risk-taking and to business in general? Nicola Horlick, CEO of Bramdean Asset Management, says, “Women have a completely different approach to life. They are more cooperative and bring more people in when important decisions must be made. So it can take a little longer to make the decision, but the decision is considered thoroughly before being made. I have absolutely no doubt that the world would have been very different if women had had the assignment.” The idea that women could have had a calming effect on the financial crisis is elucidated in a study called Are women the antidote? published by CERAM. It shows that CAC40 firms with more women in management have been more resilient in this financial crisis. The report’s author, Michel Ferrary, has found that the fewer female


Shall women save the world’s economy? - By Benja Stig Fagerland

managers a CAC40 company has, the greater the fall in its share price since January 2008. Ferrary writes that “the feminization of leadership seems to be a protection against financial crisis. At present, the financial market must take less risk and conduct more stable business.” He compares BNP Paribas, the shares of which have fallen 20% since January 2008, and Credit Agricole, which has fallen 50%. 39% of BNP Paribas’s managers are women; only 16% of Credit Agricole’s managers are women. “The change we need”

Women are the change agents of the 21st century. Through the Female Future project, half of the 600 participating women have been offered board seats. In other words, I agree with Kjell Erik Oie, Norway’s State Secretary in the Ministry of Gender Equality, when he says, “There is no turning back” and “we have realized that it is good for business.” An incorrect focus is why the current approach to gender has failed. We must seize the economic arguments. We must take a new view, that women are equal and different. Companies that recognize what really motivates women in the global workplace and market can tap a huge potential. Women’s talents will boost business performance and rescue us from the financial crisis. More female leaders in business and elsewhere will require managers and politicians to have steady courage and commitment. Women are better credit risks and are more cautious investors and managers. So it is tempting to say that if more women were bank managers, we would not be in the mess we are now. The Center for Women in Business has researched the link between female managers and innovation in knowledge-based businesses. The conclusion is that innovation is not prompted by a predominance of women, but the presence of different profiles (and thus skills and talent, I believe) in management. A company with only female managers is not more innovative than one with only male managers. Difference creates the results. The more different experiences and approaches a management team can draw on, the better and more effective it is. Gender diversity is one of the axes, according to Lamia Walker, but not the only one. The financial crisis is an interesting illustration that diversity in leadership apparently creates flexibility and more efficient decisionmaking, Walker believes. Norwegian, French, Icelandic and Spanish companies already see more women in management as the way forward. So when the maid is finished with the vacuuming, could more of our companies and organizations be ready to welcome more of her sisters with open arms? If we


want to avoid financial crises in the future, our answer must be a resounding “Yes!” And to quote Obama, “It’s the change we need.” Sources: ”Succes Punktet, Hemmeligheden bag kvinders succes”, by Peter Horn & Benja Stig Fagerland, Schultz Forlag, Oct. 2008. Lykkelige Norden - og hvad skal vi så med Norden i fremtiden? Balanser med balansen, Benja Stig Fagerland, Nordisk Råds/Nordisk Ministerråds årbog, 2007. Sunday Times Magazine, 8 June 2008. Times Online, 23 Oct 2008 ; article4066740.ece. The Guardian: guardian_pdf.pdf, mars 2008. Female Future rapporten, www.femaleliving. com, 2003, NHO. TalentTuning, NHO survey; ”Hvor ligger hun(den) begravet?” Female Future rapporten, www.femaleliving. com, nov. 2002, NHO. Stanford, Women in business. The Economist, 12 April 2006. The Economist, 19 April 2007. The Management Today ; “Let women tame the macho excess”, 01-Dec-08. Kvinfo., Forum/18.11.2008, Skal kvinder redde kapitalismen? Birgitte Pedersen. Center for Women in Business, 2008. “Er kvinder modgift?”, published in Oct 2008, CERAM. “Why women mean business”, 2007, Avivah Wittenberg-Cox And Alison Maitland. CERAM Business School. Center for Women at London School of Economics. Creditsafe. Harvard survey published in Evolution og Human Behavior (November 2008). Michel Ferrary, professor, CERAM Business School, 2008. Survey: ”Women Matter, Gender diversity a corporate performance driver”, McKinsey, Nov 2008. Hedge Fund Research “Diversity Index”, 2008. “Economists Fear Bailout Could Tighten Squeeze on Women”, 26 Sep 2008, Allison Stevens Hington, womensenews. “Lessons from the financial crash”, women-omics, Anne Hornung-Soukup, women-omics, Dec 2008. “Crisis Likely to Deepen Women’s Poverty in New York”, 25 Aug 2008, womensenews. New York Women’s Foundation., 17 Oct 2008. The WOMEN-omics Special Report on the Credit Crunch. “Til gavn for bundlinjen”, published in 2005 for the Norwegian Ministry of Gender Equality by Smith, Verner et al. “Advancing Women Leaders: The Connection Between Women Board Directors and Women Corporate Officers”, Catalyst. Djøfbladet: ”Mangfoldighed er god forretning”,Oct. 2008, by Benja Stig Fagerland. Management-issues., 11 Aug 2008, Jan 2009. Benja Stig Fagerland After her work on the Female Future project, Benja Stig Fagerland achieved the status of guru in the field of women and management in international business circles. She is an expert in “womenomics,” the relationship between women, the market and economics, and is often interviewed in national and international media, including Sunday Times Magazine, The Guardian and Der Spiegel. Fagerland has contributed to many books on management, corporate governance and networking, and she was recently co-author of Nordisk Ministerråds Årsbog 2007 and Suksesspunktet- hemmeligheden bag kvinders succes (2008) together with Peter Horn. She is a columnist for Karrieremagasinet CV/Aller, and other publications. Fagerland has received a long list of national and international awards for her work, including Social Builder of the Year and Pioneer of the Year in Norway. She is listed in Dagens Næringsliv and an economic report as a promising future leader, and she was recently nominated for Alt for damernes Women’s Prize. She is managing director of TalentTuning and is an associate at the Copenhagen Institute for Futures Studies.

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Shall women save the world's economy  

The financial crisis leads to a cultural revolution that now favors female leaders. Several management experts are now asking if it is women...

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