The amount of taxpayer dollars that has gone into cleaning up our top financial institutions' collective mess is staggering. Bank of America received $15 billion as part of the federal Troubled Asset Relief Program (TARP). Citigroup, JPMorgan Chase, and Wells Fargo each received $25 billion. But here's a cost-effective solution: Hire more women.
As has been pointed out with increasing frequency, a certain groupthink has been widely blamed for the economic crisis we find ourselves in today.
Barnard College president Deborah Spar dubbed our predicament a "one gender crash," and The New York Times's Nicholas Kristof wonders if we might all have been better off had it been "Lehman Brothers and Sisters."
Studies indicate that women are more comprehensive thinkers and less attracted to excessive risk than are their male peers. It seems we have reached a fairly broad consensus on the meltdown: Guys were the ones flying too close to the sun.
Now that we've landed back on earth with a mighty thud – a little humbler and a whole lot poorer – it's time to deal with the most important question of the day: How do we get more women into the good-old-boys network at the highest levels of the financial sector?
Recently, the Financial Times (not exactly a bastion of feminist ideology), called for a gender quota for corporate boards – sparking floods of outraged responses from readers.
Such recommendations usually unleash a swift and vigorous backlash against rocking the status quo. Arguments are made about how diversity somehow degrades the talent pool – irrelevant, of course, because women are just as talented as men and in abundant supply.
The Financial Times is spot on. It's time that the financial sector – at all levels, but especially at the top – institutes what we at the National Council for Research on Women are calling the "critical mass principle." Explicit quotas may be illegal, but research has found that to have significant impact on decisionmaking, women, or any other underrepresented group, need to attain a critical mass of 33.3 percent.
The bottom line is that, because of advances in women's education and careers, there are sufficient numbers of qualified women in every area of specialization and expertise. Research bears out the fact that if you get this mass of women and others from underrepresented groups in leadership positions, whether in the boardroom or the corner office, the decisionmaking dynamic changes for the better.
Examples from across the business sector show that applying a "critical mass principle" is a powerful force for positive change. Research shows that for corporate boards, a core of three or more women leads to greater collaboration and inclusivity. And companies with more gender-diverse boards outperform companies with nondiverse boards by 53 percent according to Catalyst, a nonprofit organization that tracks women in business.
Moreover, companies with the most gender diversity among employees bring in nearly $600 million more in sales revenue than companies that lack gender diversity.
Beyond the corporate sphere, a Stanford University study of women's suffrage demonstrated a national policy shift and improvements in public health and services in the wake of women's political participation.
Within one year of women gaining the right to vote, local public-health spending increased by 35 percent, averting what researchers estimated would have been some 20,000 child deaths per year.
Norway's law requiring listed companies to make sure 40 percent of directors are female has been called a tentative success. Instituting such quotas in the US might present legal challenges and resistance from management.
Voluntary campaigns to recruit and retain more women and people from underrepresented groups, on the other hand, would not only benefit businesses but the economy as a whole.
Shifting the lack of diversity in the top echelons of the financial sector is not just about finance, nor is it about boosting women for their own benefit. This is about men and women working together to create a more sustainable and stable financial system.
Women represent a scant 10 percent of all traditional mutual-fund managers and a mere 3 percent of the approximately $1.9 trillion invested in hedge funds, according to recent research. The needed shift in financial and other circles won't happen as long as we settle for a few token "skirts" at the nation's most entrenched boys' clubs.
Study after study confirms that men and women bring different and complementary sensibilities and leadership styles to the table.
A 2005 study from the Center for Financial Research at the University of Cologne in Germany documented differences between male and female fund managers: Women managers tended to take fewer extreme risks and to adopt more measured investment styles (which perform well over time).
And according to research published in 2002 in the International Journal of Bank Marketing, women tend to make investment-related decisions with a detailed, comprehensive approach, while men are more likely to simplify data and make decisions based on one overall strategy.
We have to work together – risk-averse and risk-prone, detail-oriented and big-picture thinkers – if we are going to participate in the global market strategically and wisely.
One of the main obstacles is the misperception of women as weaker leaders and decisionmakers. Gender stereotypes continue to portray strong executives as predominantly male.
Also, women have fewer networking opportunities than men and lack some of the strategic mentorships and sponsorships associated with career advancement. There is also a reluctance to move women into jobs that require long hours and extensive travel, based on concerns about their ability to balance career and family.
•Challenge stereotypes through management training throughout organizational structures.
•Provide diversity education to broaden perceptions and promote the business case for diversity.
•Set clear performance standards and evaluation criteria for promotions.
•Strengthen and expand the leadership pipeline by providing women with training in leadership and negotiating skills as well as access to networks and mentors.
It's now or never. If we don't adopt a "critical mass principle" – and it's up to those in the sector to figure out how to set industry-wide goals – we'll be doomed to more of the same conventional wisdom that led us down this destructive path of short-sighted and unstable financial hubris.
Playwright Eugene Ionesco once wrote, "Ideologies separate us. Dreams and anguish bring us together."
Indeed, these economic times have brought on a shared anguish for so many people – rich and poor, men and women alike. Now it's time to get serious about reform and innovation that welcome a diversity of outlooks to set us on a more balanced and sustainable course.
Linda Basch is president of the US-based National Council for Research on Women that, late this month, it is set to release "Women in Fund Management: A Road Map for Achieving Critical Mass and Why it Matters."