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Can Feminine Values Fix Finance?

Solomon Teague|Special to CNBC.com
Friday, 14 Oct 2011 | 5:31 AM ET

The financial crisis has presented an opportunity for capitalism to be redefined, with a more sustainable, less testosterone-driven model replacing the existing failed, morally bankrupt system, according to Halla Tomasdottir of Audur Capital.

Thomas Barwick | Stone | Getty Images

Speaking at the Women’s Forum Global Meeting in Deauville, France, in a talk titled: Feminine Values Into Finance, she called the financial crisis “a wake-up call,” and warned: “The world is becoming Iceland.”

Audur, which was founded in 2007, is a financial services company that attempts to do business differently, adhering to three principles: risk awareness; an appreciation of emotional capital; and the pursuit of profit with principle. “People laughed at us at first,” said Tomasdottir. “But a year after we launched 90 percent of Iceland was going bankrupt, and we were okay. So we started to build up trust and assets from there.”

Audur invests in companies that are already, or are willing to change to diversify from the top, appointing women to boards – which, she argued, has been demonstrated to make sound business sense, boosting returns by up to 35 percent. It also invests only in companies that align the interests of owners and employees, and pursue long term goals. Today it is the only Icelandic financial institution that the government has no ownership of and has received no bailout assistance.

Audur’s success story is borne out by other data. Businessweek reported that “in 2008, when financial markets were cratering, funds run by women were down 9.6 percent, compared with a 19 percent decline for men.” Bloomberg reported that while women comprise only 3 percent of hedge fund managers, their portfolios profited 55 percent more than men’s from 2000-2009.

Yet the opportunity to acknowledge these facts and adapt the financial system accordingly is in danger of being lost, Tomasdottir warned. Just as Iceland’s finance minister bailed out institutions in that country, allowing those that had done wrong to get away with it – and repeat their mistakes – the same is now happening around the world, she said.

Part of the problem is clearly the under-representation of women on management boards, preventing feminine values permeating into corporate strategies. Although women own about 41 percent of all privately held US companies, according to the Center for Women’s Business Research, they have less access to money, and in terms of capitalization of businesses the proportion of women owned business is clearly much lower.

Only about 11 percent of US firms with venture capital backing in 2009 had current or former female CEOs or founders, according to Dow Jones VentureSource.

And there remain considerable hurdles to women achieving parity with men in terms of salary or career opportunities throughout the corporate world. A recent study by the University of Utah showed female CEOs were paid 86% that of male CEOs in comparable companies.

The problems start early, according to Caroline Ghosn, founder of The Levo League, which describes itself on its website as “a medium to help young professionals break through the glass ceiling without compromising their identities as women.”

Women, she said, are statistically less likely to promote themselves on social forum such as LinkedIn, which has arguably become the de facto international recruitment tool. They are also less aggressive in salary negotiations. While men are on average happy to put themselves forward for jobs they have less that 60 percent of the stated qualifications for, women only apply for jobs they have 100 percent of the qualifications for, according to internal research conducted by HP and published by McKinsey.

“Gendered wording commonly employed in job recruitment materials can maintain gender inequality in traditionally male-dominated occupations,” according to a study published in the Journal of Personality and Social Psychology. It found that words such as “leader”, “dominant” and “competitive” were used more commonly for male dominated vocations and made those roles less appealing to women.

Words associated with female characteristics, such as “support”, “understand” and “interpersonal,” were not prevalent in male or female vocations.

It all means while women have achieved and in some cases surpassed equality at the college level, they are leaking out the pipeline earlier in the ascent up within the corporate world. “We see our job as galvanizing that pipeline, helping more women to reach the upper echelons of companies,” said Ghosn.

But there are other ingrained prejudices that need to be overcome. The same Utah study also found that identical CEO abilities and experience were judged more negatively when associated with women. And when presented with same CEO descriptions, investors judged the male entrepreneurs to have better experience, leadership ability, and board management talents.