MIXING IT UP
It is difficult to pinpoint exactly why influential numbers of women are usually found in stronger performing companies, but one organisation has a theory.
A blog written by The Diversity Project, which promotes inclusion in the investment industry, claims that men and women invest differently. Core to this belief is that men have a different view of risk than women, who are less prone to excessive risk taking when markets are surging. Women, the theory goes, also tend to stick to their convictions and hold their positions for longer. This has the added benefit of reducing trading costs.
This could be the result of women producing a fraction of the testosterone and cortisol that men do, according to research carried out by neuroscientist John Coates.
Sarah Dudney, a client partner at The BuySide Club, a search consultancy for the global investment industry, and a member of the Diversity Project’s steering committee, says that men possess a set of biases that perhaps women can balance out. “Men and women work differently and there could be advantages to having a greater biological mix in a team.”
She gives an example of when men get stressed they generate a lot of testosterone and tend to go into fight mode. She says it has been proven that women go into what is called ‘tending and befriending’ and points to Virgin Money boss Jayne-Anne Gadhia as an example. She says that Gadhia was the only person to call the regulator when the financial crisis broke to ask: “What do I do?
“In a situation of danger women will tend and befriend and look after the group,” she says. “Men tend to go into hunter syndrome.”
Because of the differences of how people perform under stress and respond to risk, it would be useful and beneficial for businesses or asset managers to have a mix of men and women in senior roles.
An example of what can happen without a diverse team is the financial crisis. A quote often repeated at the time was: “Lehman Brothers would not have happened if it was Lehman Sisters.” This is a nod to the observation that the ‘group think’ in these circles at the time was dominated by men.
Dame Helena Morrissey, who founded the 30% Club, a campaign to increase the number of female directors in the FTSE 100, agrees. “Post the financial crisis there was a realisation that people cut from similar cloth was not necessarily the best team, however brilliant they were individually.” She points to The Royal Bank of Scotland’s board at the time of its ill-fated ABN AMRO acquisition as an example, where 17 of its 18 members were men.
“Googling the line up at the time is like playing a game of spot the difference,” she said, adding that they were all well qualified but had similar backgrounds and, it seems, didn’t ask the right questions.
This was a point picked up by the regulator and proved a catalyst for launching the 30% Club with people realising that more diversity was needed in boardrooms.
Having more women around the table was the obvious place to start, but it has moved on from the idea of ‘just add a few women in and sort the problem’. Today the goals is to get the best thinking, the best collective intelligence, diversity of thought and multiple perspectives, such as from people of different genders, ethnic groups and economic backgrounds.
“There are some quite well established links, albeit also quite subtle and mysterious, between people with different identities and what they bring to the table,” Morrissey says.
“It was the start, not the end,” she adds. “We are now getting into a more interesting and more inclusive variation on it, but it is not just about women on boards it is about building the best teams and making sure that you don’t recruit just another brilliant person without thinking are they adding something new to what you already have.”
The case for having differing views in an investment fund or on a corporate board appears to be strong, but it is not perfect. It might be difficult reaching a decision with so many different views to be considered.
