Human Capital

It's typical: the men make the mess and the women come in to clean it up, joked an Icelandic banker about the appointment of two women to rebuild Iceland's collapsed financial system. The promotion of Elin Sigfusdottir and Birna Einarsdottir to run the nationalised New Landsbanki and New Glitnir banks respectively is an attempt by the Icelandic government to draw a line under the past and start again. The macho culture of irresponsible risk-taking that many now blame for Iceland's financial meltdown will no longer be tolerated.

Bringing in the women, pooper-scoopers in hand, would seem to be an admission that the men have screwed up, big time - for, let's acknowledge it, financial firms are still largely run by men, for men. Radical voices are calling for the testosterone-ridden rules to be torn up and rewritten along more feminine lines. 'The current crisis gives us the opportunity to insert gender into the re-writing of the rules,' said Nadereh Chamlou, one of the World Bank's senior advisers. 'We need new people at the table - people who are not associated with the past,' she adds. Enter the women...

'What Iceland is trying to portray is that it is taking lower risks because women take fewer risks than men,' says professor Tryggvi Thor Herbertsson, CEO of Nordic investment bank Askar Capital and, until recently, economic adviser to Iceland's prime minister, Geir Haarde. 'Women are more cautious and more thoughtful. I think men look more for high returns - which, of course, brings greater risk.'

Herbertsson sees the promotion to chief executive positions of Sigfusdottir and Einarsdottir as 'an honest experiment'. And one born out of desperation, some might add.

So, what if women had been running our financial institutions? Would the City be mired in the doo-doo it is now? 'Women have a totally different approach to life,' says City veteran Nicola Horlick, CEO of Bramdean Assets. 'They are less concerned about grabbing as much as they can for themselves and have a greater desire to build firm foundations that will endure. I have absolutely no doubt that the world would have looked totally different if women had been in charge.'

It's a damning verdict, but Horlick, who has amassed (but not grabbed) a personal fortune of £25m, takes a long-term perspective, arguing that in previous centuries the energy of young men had been absorbed by warfare. The relative peace in Europe in recent times means this energy has been diverted into the financial arena. 'That is the new battlefield,' she says. 'It is no surprise to me that things got out of control. It was a huge power game, where more and more risk was being taken, with vast rewards for the winners. It was no longer to do with serving one's country; it was each man for himself and a game of trying to amass incredible wealth in the shortest time possible.'

The idea that women are sensible and collaborative and men are competitive and aggressive has been with us ever since Fred Flintstone chucked Wilma over his shoulder. Some suggest that women are more emotionally intelligent, and men less connected. In A Woman's Place is in the Boardroom: The business case (Palgrave, 2005), Peninah Thomson and Jacey Graham quote an anonymous British CEO who told them that '[With women,] there's less ego around - less positioning. We're all bloody kids. Boys are boys. Women bring calmness and objectivity; not all the time, but generally they're calmer and there's less jostling for position.'

The opinion is widespread among the upper echelons of business. According to Niall Fitz-Gerald, deputy chairman of Thomson Reuters: 'There is a feminine approach to leadership, which is not, of course, confined to women. It is about being intuitive as well as rational. It is about multi-tasking and being sensitive to people's needs and emotions, as well as relationship-building and generous listening.'

Indeed, FitzGerald argues that if any organisation wishes to transform itself, its leaders need to inspire, 'and that is only possible if you connect emotionally with your followers, show self-awareness and openness, integrity and authenticity'. Yabba-dabba-doo for the chief execs in heels, then. But what conclusions can we draw about the different attitudes that men and women have towards risk-taking and conducting business in general?

'There is an awful lot of evidence to suggest that women are more risk-averse,' says Collette Dunkley, CEO of gender intelligence experts XandY Communications, who has sat on the board of four global companies. 'Men are more individualist and competitive. Women are more collaborative and tend to bring in more people when they make a decision. They take a little longer but are extremely thorough.'

This can be attributed to the different ways in which male and female brains are constructed, says Dunkley, which mean women take decisions using both the emotional and rational sides of their brains, whereas men take decisions using either one or the other. Women take more time-consuming considerations into account when making a decision, but that decision will be more holistic - the implication being that men are at a greater danger of taking an irresponsible risk than women.

Then there is the different hormonal makeup of the sexes - most obviously, the fact that men have significantly more testosterone than women, and women have higher levels of progesterone. Research by Cambridge University into the behaviour of 17 male City traders earlier this year showed that when they recorded high levels of testosterone in the morning, on average they made more profit for the rest of that day. Testosterone increases confidence and appetite for risk - qualities that benefit any trader on the hunt.

But testosterone can also make you impulsive, sensation-seeking and, in extreme cases, euphoric and/or manic. Dr John Coates, lead author of the Cambridge research study and a former trader himself, says 'rising levels of testosterone and cortisol (the "stress hormone") prepare traders for taking risk. However, if testosterone reaches physiological limits, as it might during a market bubble, it can turn risk-taking into a form of addiction.'

Too much testosterone is not a good thing, agrees Dunkley. 'The problem with finance is that there is too much thrusting individualism and not enough femininity.'

Surely, a balance between the male and female approach to business is the way forward? Making generalisations is a dangerous game, but the idea that women and men complement each other at work does have a resonance. In fact, research by London Business School in 2007 found that a team composed 50% of women and 50% of men is the most innovative, effective and stable.

All well and good, but if a company has few women in its middle and senior ranks, it cannot achieve this optimal balance. This is where the Icelanders have cottoned on to something important - that a company with a female chief executive is more likely to preside over a gender-diverse organisation, including more women in senior and middle management, than one led by a man.

This is confirmed by the research from London Business School, and has actually been put into practice by the Norwegian government. From 1 January 2008, all public companies in Norway have been required by law to have 40% of their boards made up of women. Spain, meanwhile, has allowed its businesses a decade to ensure that women fill the same proportion of all boards and executive-level positions.

Could Britain follow suit? Sir Philip Hampton, chairman of J Sainsbury, and Peter Sutherland, chairman of BP, were two of 17 British business leaders who signed a letter to the Daily Telegraph in October, making clear the urgent need for more women in the boardroom.

The theory that women could have had a restraining effect on the excesses of men is made clear in a French study called Global Financial Crisis: Are women the antidote?. Published in October by French business school Ceram, it shows that firms in the CAC40 (the French equivalent to the Dow Jones or FTSE indices) with a higher ratio of women in management have shown better resistance to the financial crisis. Report author Professor Michel Ferrary found that the fewer female managers a company has, the greater the drop in its share price since January 2008.

Ferrary writes that 'the feminisation of management seems to be a protection against financial crisis. Currently, financial markets value firms that take less risk and are doing more stable business.' He cites French bank BNP Paribas, where 39% of managers are women; its stock had fallen 20% since the beginning of the year. Compare this to Credit Agricole, the largest retail banking group in France, whose share price has dropped by 50%: only 16% of its managers are female.

In a country where women only got full voting rights in 1944, the news came as a shock to the French. 'Some made fun,' admits Ferrary, 'some people were a little bit angry, but most agreed.'

Having an increasing number of women participating in the running of a country and its financial institutions is already regarded by the French, Icelanders and Spanish as the way forward. So, once Mrs Mop has finished with her pooper-scooper, could our City companies be ready to welcome more of her sisters with open arms? If we don't want a repeat of the financial catastrophe we now find ourselves in, perhaps the answer should be a resounding yes.