Hiring aggressive women will result in higher risks

by 29 Mar 2012

Women at board level are “less experienced”, “more aggressive” and “more likely to take risks” with a bank's finances, a report by an all-male group of academics and bankers has claimed.

The Bundesbank study, Executive board composition and bank risk taking, makes research-based claims that are in marked contrast to previous studies which have indicated that women in senior management are more likely to take a balanced, risk-averse approach than male counterparts. Yet the German central bank's research found that female board members were more likely to take risks with a bank's finances than their male counterparts, and urged financial institutions to be cautious when re-addressing the gender balance. “Employing a higher proportion of female board members significantly increases risk taking,” the report says.

The group of academics from Germany, Britain and the United States said those women who managed to break through the glass ceiling and scale the corporate ladder tend to be less experienced than men in a similar position. The report does, however, concede that the so-called ‘risk taking behaviour’ results in only marginal economic change.

The report, which was based on analysis of the volatility of bank profits over a 16-year period and how outcomes changed as the board composition changed, also claims that women at the top level can be more aggressive than their male colleagues. Further, the report claimed that a mixed boardroom can even lead to more infighting. “If group members come from heterogeneous backgrounds in terms of experience and values, this might increase the potential for conflict inside the group and hinder decision making,” it said.

Among other German banks, Commerzbank, which bailed out by Angela Merkel’s government during the global financial crisis, has no women on its board; nor does rival Deutsche Bank.

The Diversity Council of Australia (DCA) said the business case for increasing the number of women on boards is firmly established, and cited research from the US which identified higher financial performance for companies with larger representation of women board directors in three key financial measures:

  • Return on equity (ROE): on average, companies with the highest percentages of women board directors outperformed those with the least by 53%

  • Return on sales (ROS): on average, companies with the highest percentages of women board directors outperformed those with the least by 42%

  • Return on invested capital: on average, companies with the highest percentages of women board directors outperformed those with the least by 66%

Australian research has also arrived at similar conclusions and the Reibey Institute also found that ASX500 companies with female directors delivered an average 11.1% higher ROE over five years than those without women directors.

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  • by Leonnie Blumon 30/03/2012 11:36:44 AM

    Once one trawls through the bias, assumptions and anecdotal evidence in this report, it is found that no objective, standardised instrument of aggression was used to demonstrate that female directors are actually "more aggressive" than males, that increases in risk taking following the addition of a female board member are "economically marginal" and female board members are less experienced because they are being selected at younger ages (i.e. females are demonstrating greater merit earlier than males). The lack of intellectual rigour in this report is alarming indeed!

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