What a fine mess! - Building Gender Balanced Business

BY ANNE HORNUNG-SOUKUP, FOUNDING PARTNER,AXIA INVESTMENTS SA

Anyone who doesn’t live in a cave knows that the entire world is in the midst of a major financial crisis, the worst since the Great Depression of the 1930s, as the press keeps reminding us.

Some major financial institutions have gone bust while others have been bailed out, nationalized, or been hustled into the arms of other institutions. Stock markets worldwide are down by 30 to 60% since January, and credit markets remain sluggish, even after hundreds of millions of (pick any currency) have been thrown at them by desperate governments and central banks.

It’s hard to escape the fact that virtually all protagonists in this crisis are men. All those who made huge bonuses while driving their institutions into financial ruin were men. Fannie Mae and Freddie Mac were headed by men as they went overboard giving mortgages to low income people who didn’t know any better. UBS was headed by men as it launched itself into derivatives way beyond its capacity for risk control. AIG in the US, Northern Rock in the UK, HypoBank in Germany, all were headed by men. The Head of the Fed of the United States until recently, who felt that banks could be trusted to regulate themselves as they traded ever-more complex derivatives? A man.

Many people today are wondering whether having more women at the top in financial institutions would have allowed us to avoid the agony of the present crisis. Unfortunately we’ll never know for sure, but there are a few clues worth pondering.

In 1997, the Chair of the Commodities Futures Trading Association in the United States asked Congress to legislate more regulation and transparency of the fast-growing derivatives market, and warned that the current regulatory void could lead to a market crisis and economic woes. Who was the Chair at the time? It was Brooksley Born, a woman. Who resisted her call for a closer watch, ferociously, until she finally left her post? Alan Greenspan, then head of the Fed, and Robert Rubin, Secretary of the Treasury. Both men.

Iceland is a fascinating (in a morbid kind of way) case study in over-the-top financial behaviour. The banks of this tiny country (population 300,000, about the same as the canton of Geneva) went on a decade-long lending spree that gave them total debt of many times the country’s entire annual national product. Iceland had a woman President (Vigdís Finnbogadóttir) in the past, but she finished her term in 1996, when the debt had just starting ballooning.

As the banks went wild, regulators (again, all men) were asleep at the controls, and Davíð Oddsson, the head of the Icelandic central bank (a man, of course), who is considered to have aggravated the crisis with his decisions and comments, was a politician, not an economist, who was “promoted” to his current position after he had retired from elected service.

Now the Icelandic government has asked women to head up two of the banks in question, with the specific task of changing the culture. They are Elin Sigfusdottir and Birna Einarsdottir, who have taken over the nationalized banks, New Landisbank and New Glitnir respectively.

Anne Hornung-Soukup, Partner, worked for Guyerzeller Bank in Geneva, Switzerland for 16 years before co-founding Axia Investments SA in 1999. She graduated from Smith College with a BA in Government and French and earned an MA in International Business & Communications from the American University in Washington DC.