Posted On:3/27/2012 1:41pm
Unfortunately note these kind of boards
These kind of boards
In the UK and Europe there has been a growing movement to get more women on boards of major companies and especially financial companies.
This drive is based on claims that women make for better board members, because they are supposedly more cautious and take fewer risks. This inspired deputy leader of the Labour party Harriet Harperson to claim that the financial crisis would not have happened if it had been 'Lehmans sisters' instead of Lehmans brothers. A characteristically trite comment.
This concept has led Norway, France and other European countries to impose quotas on businesses. The EU, whose laws override those of individual nations, is moving towards mandatory 40% female quotas on corporate boards.
However, for whilst some studies have produced results indicating positive outcomes from greater female membership of corporate boards many others have shown that they either have little impact and in some cases damage productivity and good operating. Others have shown women bringing positive benefits in some areas and negative effects in others.
In this spirit of enquiry academics working for the German central bank, the Bundesbank. Conducted their own study into the effect that women have on risk taking on corporate boards of banks and financial institutions.
The study drew on the Bundesbank's 16 years of data between 1994 and 2010, for 19,750 bank-year observations in 3,525 banks and financial institutions.
Rather surprisingly, for the general media consensus, that women reduce risk taking in financial companies by being on corporate boards this study revealed that women on corporate boards actually increases risk taking.
Not only did women on boards increase risk taking in companies that were run with a culture where risk was more acceptable. It also showed that introducing women into boards of conservative companies saw a 3 year slide into more risky decision making.
The study also showed that women tended to self-select into companies with a higher capitalisation and lower culture of risk taking.
The study concluded that the greater risk taking by women on boards was in part due to lack of experience. Somewhat of a circular argument. That heterogeneity in boards increased risk taking and damaged communication and thus prevented balanced consensual decision making. As well as that in order to compensate for any potential perception of being un-deserving of the position women were more likely to take risks.
This study builds on previous Norwegian studies in 2003 and 2010 that showed that women on corporate boards damaged profitability and increased risk taking.
Whilst this study should not be used as an excuse to exclude women from boards it should serve a sobering effect on giddy notions of women being the solution to risk in financial services and lazy sexist thinking that women are less risk averse or that men are more risk prone.
The study also addresses two other key risk areas - age and education. Indicating that for every 5 years of age decrease likelihood of risk taking increases by an average of 2% and that holding of doctorates is also indicative of risk aversion.
The picture that can be drawn from this is that imposition of mandatory quotas for women on boards is not only potentially damaging to companies, but also to the cause of increasing the presence of women in executive positions.
As parachuting in women to board positions means their youth and lack of experience make them more likely to be risk prone. Thus more likely to look as if the issue of their competence and risk propensity is gender related rather than related to their experience and age.
In order for women to be effective board members they need to have been given the time to gather experience, maturity, ensure their addition to boards is based purely on merit and thus results in homogeneity.
All Out of Bubblegum
Posted On:3/27/2012 1:58pm
Correlation vs causation much?
There's no choice but to confront you, to engage you, to erase you. I've gone to great lengths to expand my threshold of pain. I will use my mistakes against you. There's no other choice.
Posted On:3/27/2012 2:48pm
Style: BJJ, MMA, JJJ
Just went to the Ernst & Young financial reporting update yesterday. At the behest of ASIC, a new non-IFRS disclosure standard* has been introduced for this reporting season. Whilst there are no quotas it does require the disclosure of gender diversity within a reporting entity at each level. It will be interesting to see if when adhering to the 'please explain' or 'if not why not' proponents of the standard if anyone will be brave/foolish enough to say that they were unable to find suitably qualified, skilled and experienced female candidates for the executive positions.
On a side anecdote, the job that I just left was headed by a woman (who was very capable and experienced operationally within the sector). When delivering the budget last year (it was very aggressive given the current economic climate), which was the first one she had delivered for that business, I lost count of the number of times the CEO stopped to ask 'are you sure you want to commit to this?'. Needless to say that at the time of my departure the results were already somewhat behind budget. It was as if her need to prove herself drove her to take a position that was untenable, which is what the study was getting to IMO.
Last edited by cualltaigh; 3/27/2012 3:09pm at .
Reason: I accidentally half the sentence.
Dum spiro, spero.
Tada gan iarracht.
His heart was visible, and the dismal sack that maketh excrement of what is eaten.
Posted On:3/27/2012 3:02pm
Well, for starters I think the idea that there's any measurable benefit to having more or less women on a board of directors is just silly. It's akin to the whole "our diversity is our greatest strength" mantra you hear from so many companies. That's bullshit. Smart motherfuckers are your greatest strength, regardless of sex or race.
As to the "Lehman Sisters" comment, I'd say go ahead. Let's find out then. Because what they're going to find out is that leadership is hard. Managing complex situations is hard. Managing huge organizations is hard. Managing shareholder expectations is hard. Anyone can screw up and/or be corrupted. They WILL **** up, just like anyone else. And when they're at the top and they **** up there will be no mercy.
Posted On:3/27/2012 3:18pm
That one lady, John Corrizine, sure did a number on her company!
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