About eight years ago when the financial crisis hit Iceland, a tiny island with a population of 320,000, most Icelanders found themselves in serious financial tribulations. If the US and Europe got drunk on easy money, Iceland was the guy at the party who fell unconscious in the corner. It got so bad that somebody put the country on eBay up for sale. Three of the country's largest banks, with assets worth 10 times the country's GDP, fell in the span of three days, the currency collapsed, the stock market fell 95 percent and nearly every business on the island was bankrupt.
It is a frightening case study in reckless financial behaviour. Banks had gone on a decade-long binge of long-term lending. Just like in all financial capitals of the world, men were at the helm of the game of the financial sector in Iceland. “It's always the same guys,” Halla Tomasdottir, then a director at the chamber of commerce, said to Foreign Policy. “Ninety-nine percent went to the same school, they drive the same cars, they wear the same suits and they have the same attitudes. They got us into this situation -- and they had a lot of fun doing it." Then she criticised the system that focuses “aggressively and indiscriminately” on the short-term maximisation of profits, without any regard for losses that is focused on short-lived market prices and lucrative bonus payments. She called it typical male behaviour and compared it to a “penis competition”.
Many predicted a Greece-like disaster. But Iceland is not Greece. Today it is buzzing - unemployment is at 4 percent and tourism is booming. How did the country emerge from its deep freeze? Who cleaned up the mess left by a group of testosterone-high men?
It was women like Halla Tomasdottir and Kristin Petursdottir, then a bank manager, who in 2007 formed Audur Capital, a financial and Investment Company with the aim of incorporating feminine values into the world of finance. What exactly did they have in mind?
The two women sought to espouse four principles: risk awareness, straight talk, emotional capital, and profit with principles. Investors and clients should be fully informed of the risks involved in investments before stepping in. Clients should have access to both positive and negative aspects and developments in their investments. They also put a lot of faith in emotional capital, asserting that “emotional due diligence is just as valuable as financial due diligence”. And lastly, they called for an expansion of the definition of profit, arguing that financial gain is not the only kind of profit to be made. They called it profit with principles.
After the meltdown, the government hired women like Halla and Kristin to manage banks, change the culture and tidy up the mess. The macho-culture and the irresponsible risk-taking that led to the financial meltdown were no longer going to be tolerated. The risky behaviour of some men which threw the banks and the country over the brink was going to be modified by new women managers who would ensure more conservative and prudent lending.
This led to a cultural revolution that now favours female leaders. European and American researchers are pointing to the importance of gender diversity in leadership in financial institutions. Leading management experts are asking if it is up to women to save capitalism. Gender is no longer a women's issue, it is very much a business issue. In 2008, the Economist famously introduced the concept of “womenomics” a term for the next economic revolution: that it will be women who save the future of the world economy.
Never before has there been so much focus on the economic importance of women. Michel Ferrary, a Professor at CERAM Business School looked at the correlation between the proportion of women in management and share prices of 40 French companies. He concluded that the more women in management, the fewer the losses. Why? Because “It may be, for example, that men and women have different risk-taking behaviours, with men less, and women more, risk-averse.” Realising the potential of women in business, Norway introduced legislation requiring 40 percent of Norwegian board seats be reserved for women. Today, the country has more female board members than any other country. Spain and Germany are moving in the same direction. Another example of the economic caution of women is the Grameen Bank whose 97 percent women customers paid their debt on time.
But According to Lamia Walker, former associate director of the Centre for Women in Business at the London Business School, it is not about women not wanting to take risks. Instead, she believes men and women reach for different management tools, which helps create more effective organisations. Other experts have said that women are calmer and less aggressive in positioning themselves. A McKinsey study and research by Alice Eagly, an American psychologist, show that women have a more varied management style and use a broader range of management tools than men, which in turn means that companies more easily adapt to new situations. Female managers usually use techniques such as group decisions and mutual inspiration, while men typically point to decision-making on their own and command and control.
I think women have a completely different approach to life. They are more cooperative and bring more people in when important decisions must be made. With them it may take a little longer to make the decision, but the decision is considered thoroughly before being made. When I read that a number of public banks in this country are being weighed down by bad loans, I wonder if there is a lesson to be learnt from Iceland.
“Why can't a woman be more like a man?” sings Henry Higgins in My Fair Lady.
Considering the performance of Icelandic women, I am asking, “Why can't a man be more like a woman?”
The writer is a member of Editorial Team at The Daily Star.