Regulators are all over the banks dishing out fines for the Libor fixing scandal. It does feel very much like bolting the stable door when the horse has already bolted. And the reforms feel incredibly flimsy particularly the one about allowing banks to keep their rates secret for three months so they don't garner a reputation for being in trouble! I'm not sure enough note is being taken of the root cause of the problem when considering the solution.
When I picture the rate fixing going on I imagine a bunch of young men on the phone with their eight screens in front of them. They are all laughing and joshing with other men in other rooms full of men with lots of screens - there is a heady cocktail brewing:
1) Self interest - how can I profit out of this?
2) Ego - how can I come out on top?
3) Group think - everyone's at it so I need to be in the game
It reminds me of Friday evenings in my house when my 16 year-old has his mates around. Everything's a competition. PlayStation, music, football, general knowledge. The banter is competitive and it's cool to come out on top. Winning makes you popular. Men produce more testosterone when they are surrounded by other men. Testosterone encourages risk taking.
When my daughter has her friends around the vibe is VERY different. Showing off is decidedly uncool, sharing problems is de rigueur. Being openly competitive is looked at askance. Collaborating over homework can go on for hours.... and hours. Neither approach is right or wrong, but they both have clear advantages.
So I have a simple solution to avoid the next financial scandal whether it's CDOs or Libor - hire more women. I mean it. Seriously. Some of women's self-questioning, collaboration and prudence would act as a much needed balance to men's more gung-ho approach. Women are not risk-averse, but they are more prudent about it. A study by Leeds University looking into liquidation showed that, of their 11,000 sample companies, those companies where there were at least one or two women on the board were 20% less likely to go under. They put it down to women's prudent risk-taking strategies as well as their people management skills. A recent study compiled by Barclays Wealth Management shows that affluent, established female business owners in the UK are earning on average 14% more than their male counterparts. But, when you examine this more closely, what you see is the same sensible approach where women don't borrow as much for start ups and only start to pay themselves a lot once they have a proven financial record and the business is on very solid ground.
And if you think my simple solution all sounds a bit too flippant, or is devoid of regulatory technicality, just bear in mind that all organisations, from the smallest to the largest multinationals, are simply groups of people - and people tend to act far more on human instinct than they ever will on rules and regulations.Suggest a correction