Lehman Sisters?

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“Having too many men involved in business might cause them to take more risks, and having more women would probably be good in lots of settings. Women are the brake pedal.” – Economist Terry Burnham.

Has anyone ever noticed how much testosterone is on Wall Street? Men are everywhere! Do you think that if more women had held upper level management, including CEO positions, in financial institutions across the country, that the financial crisis would have been less severe? After shuffling through various articles on the Freakonomics Blog, I was directed to a piece from the New York Times opinion section entitled, Does Wall Street Need an Estrogen Injection? I found this article intriguing as it focuses on more sociological and less technical causes of the financial crisis (more in my area of expertise!).

The article highlights how many of the large financial institutions on Wall Street, including Lehman Brothers, Goldman Sachs, Citigroup and Bank of America have had extremely few women serve top-level roles. For example, at Citigroup, there are NO women on the firm’s 18-member executive committee. Furthermore, there has never been a woman executive of a Wall Street securities firm.

Could the absence of women on Wall-Street be a contributor to the risky and competitive behavior that unfolded the financial crisis? If more women were on Wall Street during this time would the risk-taking have been lessened? I find all of these questions quite interesting so I searched for a few more answers in the article, What if Women Ran Wall Street, from the New York Magazine. This article contends that there is something biological that causes risk-taking behavior. It continues to say that the major biological factor is testosterone. Anna Dreber, an economist research at Harvard’s Kennedy School quotes, “I can imagine that being in a very competitive environment with lots of other competitive males makes the testosterone go up, which leads to even more risk.”

John Coates, a research fellow studying finance and accounting major at the University of Cambridge noticed the following trend during the “IPO heyday of the late nineties”: “Male traders were acting odd during the bubble,” he recalls. “They were displaying what we call clinical symptoms of mania. They were delusional, euphoric, overconfident, had racing thoughts, a diminished need for sleep.”

Even women who were classified as aggressive found that they had trouble taking risks that were as large as their male counterparts were taking during the unfolding of the crisis. Do you think the more conservative tendencies of women would influence male co-workers to make more rational decisions? There were too few women on Wall Street during the crisis to have any significant influence. What do you think the result would be of more women on Wall Street?

Ultimately, I feel that there were a plethora of causes of the financial crisis, but I think that the male-dominated Wall-Street contributes much room for a sociological analysis of the financial crisis. I would be interested to hear everyone’s thoughts on this issue. Do you think that there is a legitimate correlation between the financial crisis and gender inequality on Wall-Street? Or do you think that the risk-taking behavior on wall-street is a personality trait possessed by everyone in the industry, regardless of their gender?

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9 Responses

  1. Interesting perspective. I had not considered the impact of gender.

  2. I wrote my last essay on women in the workplace, so I find this interesting. Women have been proven to be less aggressive and less prone to taking risks, but this is cited as a major reason why they are disadvantaged in the workplace and not as respected most of the time. Therefore, it makes me think that it is the values and traits that are desired in the industry that should be blamed. If thoughtful, conservative individuals were desired, male or female, then perhaps we would be better off. The imbalance between males and females is simply reflective of the characteristics desired in these organizations, which have a greater tendency to be found in males.

  3. I agree with Brook. I feel that while most women do have characteristics that you categorize as more conservative, those who have the possibility of making it to the top of Wall Street would not fall under the stereotype given to women. In addition to believing that part of the reason men are in these positions is purely because of the characteristics desired by organizations, it is important to note that not all of the deciding falls under the organizations power. Most women will only apply for jobs in which they feel completely qualified for; whereas men are more likely to apply for anything. This means that women in the work force are also selling themselves short, therefore, leading to an imbalance in the male to female ratio.

  4. Perhaps the industry needs to rethink what kind of character traits should be deemed “desired” for its participants….I understand that the role of an occupation on Wall Street is conducive to someone who engages in aggressive, risky behavior…regardless of whether they are male or female…but maybe this role needs to be redefined.

  5. […] Lehman Sisters? […]

  6. I thought this post was extremely interesting. When thinking of the Great Recession most people think of the housing bubble or financial crisis management and not the social factors of the leaders at the top. Although there may be some truth to this, I think that what Brooke said is also very important. The traits that may cause problems on Wall Street such as overconfidence or risk taking generated behavior are the same traits that are often times needed in order to be successful. Those involved in the decisions of Wall Street got there for a reason, including the women. More women does not necessarily mean the “brakes” could have been put on the risk taking behavior of these top firms.

  7. This is good stuff. I like the arguments posed by Brooke and Jessie on this post. If there were more women involved in upper management, they could lessen the possibility of that company making higher risk choices. They could reduce the amount of testosterone in the upper level of management and possibly help control the decisions that are being made. Businesses should change what they’re looking for in managers. Women could add something knew to the equation that wasn’t there before.

  8. Great post Molly! I have never thought of the financial recession in terms of gender issues. I think that there are less women on Wall Street for a variety of reasons but general personality traits is definitely a reason. Women do tend to make less risky decisions but I don’t think this can be generalized to all women. Working on Wall Street has a certain personality needed which does tend to be riskier. In general, I agree with Team Memphis in that maybe Wall Street should not look so much to change all the gender dynamics but to change the characteristics they look for in upper level executives.

  9. Sure you can say that the attitudes of upper level execs needs to be changed, but the fact remains that investors are looking for big returns. The less risky upper management is, the smaller the returns will be. What really needs to be changed is the mindset of investors. As long as profits are their main concern, there will be “problems” in upper management.

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