Clem Sunter

Lehman Sisters

2010-08-25 13:15

Sometimes a quote in a magazine hits you right between the eyes. This one was contained in an article by Bruce Crumley in Time magazine on the boardroom revolution. It was attributed to Ruth Sealy, senior research fellow and deputy director of the International Centre for Women Leaders at England’s Cranfield School of Management.

She said: “We’ll never know if Lehman Brothers might have avoided collapse if it had been Lehman Sisters, but a wider range of perspectives and opinions in its leadership would have made it less likely that inordinate risk and bad decisions would have been taken.”

Ping! Two questions immediately came to mind:

1. Are women naturally more risk-averse than men?
2. Are men in the company of women more risk-averse?

My answer to the first question is that I don’t think appetite for risk differs between the two genders. When men ignore risk, it’s usually bravado and when women ignore risk, it’s usually passion. But sometimes you get a woman like Maggie Thatcher who demonstrated extreme bravado with some of her decisions; and sometimes you get men who throw caution to the winds because they are passionate for a woman or a cause.

Equally, if you go into any casino, you see as many women at the slot machines as men. Women are probably more cautious drivers, but men tend to be more analytical in deciding the best option in a difficult situation. Women more often act on impulse which is why they are targeted in advertising campaigns for any fast-moving consumer product. Men have less ability to adapt.

I know that if I say any more on this first question, I shall be accused of stereotyping the sexes. So I shall conclude that individuals – irrespective of whether they are male or female – have their own special mix of conservatism and recklessness.

The second question is the one that interests me because I think the answer is yes: men are far less “blokish” in the company of women than if they are solely in the company of men. It applies equally in bars and boardrooms. The difference between the first and the second locality is that an all male situation does not usually matter in bars. All that happens is that the stories become more exaggerated. Obviously, if it increases the risk of driving home drunk or ending the evening with a punch-up, it does matter.

However, boardrooms are where money is discussed and investment decisions are made. A bunch of men, suitably intoxicated with power and position, can collectively take extraordinary risks. I wonder how many women were on the board of Enron when it failed; or on the boards of all those banks who accumulated ridiculous losses by gambling on derivatives.

I have my own experience too. I served on a board for many years which had no women. The mining industry till recently was an all male affair. The introduction of one woman onto the board in the early 1990s transformed the conversation and, as was mentioned in the quote, broadened our perspective on many issues.

Hence, the gender composition of the board is a very good indicator of that board’s attitude to risk management, the extent of its radar system in picking up turning points and trends, and the richness of the conversation that takes place before critical investment decisions are made. It also means that the company is more likely to abide by the rules of corporate governance. Nevertheless, the quality and integrity of individual directors remains paramount.

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