Of Rules and Role Models

Christine Lagarde on quotas, quality, and the beauty of diversity

08/03/2012 | by Christine Lagarde

Category: Gender Relations, Government and Society, Worldwide

With just about one percent of its executive positions occupied by women, the finance world seems to be a bastion against the emancipation of women. What results does that have? IMF managing director Christine Lagarde speaks about quality and quotas, a lack of role models, female economic activity, and a change that will benefit everyone.

IP: Ms Lagarde, you once said you wished there were more women in the world of finance. What sort of difference would that make?

Lagarde: I believe in diversity, and I think that without diversity, people tend to go in circles without much challenge. You end up with what I call “corridor-thinking,” where you don’t see doors but you go straight into the same kind of solutions. Diversity brings differences, brings new views, new backgrounds, and new critical approaches. It enriches thinking and the working-out of solutions. And as a result I am strongly convinced that in the world of finance, which is very male-dominated, there should be more diversity—and therefore more women, because diversity is based on gender diversity as well as regional diversity or diversity in educational background. 

IP: To bring people with different mindsets and thoughts together in order to develop a broader approach—was that the reason for having these out-of-the-box meetings, to which you invite important people from different fields, from politics, economics, and culture? And is “corridor-thinking” especially pronounced in the finance world?

Lagarde: I think people in any professional sector that does not include diversity tend to be more narrow-minded, because it’s more comfortable—let’s face it. In the world of finance there is a disproportionately higher time pressure than in other sectors, and the risks are far greater. That makes the consequences of “corridor-thinking” even worse.

IP: What contribution can women make to lead out of this “corridor-thinking”? Perhaps a greater sensibility in regards to risk-taking?

Lagarde: It is commonly observed that women tend to take a more conservative approach to portfolio management. I am careful about making such generalities, because you will also find female managers who take high risks...

IP: ... as we are talking about diversity...

Lagarde: Exactly. But in the main it is often observed that they tend to be more conservative. I don’t know whether it has to do with historical background, with the fact that it was the job of the women to build the nest, but it is a fact.

IP: So could we have avoided the big economic and financial crisis if it had been the “Lehmann Sisters”?

Lagarde: I know, I have said that. If there had been more Lehmann Sisters and fewer Lehman Brothers, the world would be a different place. Unfortunately we cannot rewrite history. We are where we are. I have traveled extensively lately, and whenever I travel I try to meet women entrepreneurs, women bankers, women who play a role in the economic and financial world. They are, as before, a minority, and that is a pity because they can bring a lot to the table. Take, for example, credit: women are much better at re-paying credit than men. So that’s another good reason to include them in economic life. Any entity giving microcredit around the world will tell you that women will reimburse at a rate off 80 to 90 percent. Whereas men have a much, much lower track record. 

IP: You are a strong promoter of the 30-percent quota for women, at least for the boards of directors of major enterprises. Now there are many who say: setting a quota breaks the rules of the free market. What speaks for the quota and how would you implement it without mingling in the free markets?

Lagarde: I am a free-market thinker, but I think that it contributes to the beauty of the free market when there are rules that prevent excesses and abuses. And despite the fact that 50 percent or more of the population is made up of women, there is such a small proportion of women...

IP: ...one percent... 

Lagarde: ... yeah, one percent. In my view, that could be regarded as a market abuse and therefore needs to be remedied. And if one were, for a period of time, to introduce quotas that would restore order to the market, then I would see no contradiction in my attitude toward the free market. When I was younger, I was—perhaps like Angela Merkel today—of the opinion, that women would not need something like that...

IP: Quality not quota?

Lagarde: Yes, exactly. Quality versus quota. But over time I have changed my mind.

IP: If we could come back to the theme of microcredit. You have said that women are much more reliable when it comes to handling credit. Wouldn’t it be useful to start a global initiative to help women in this case—to make them more prominent as borrowers? Would there perhaps be a role for the IMF to play?

Lagarde: There are already plenty initiatives of that nature. Michelle Bachelet is sort-of the women’s ambassador who has been appointed at the United Nations to take the lead on all women’s initiatives. I am a strong believer in delivering on the initiatives. All the men and women who advocate more diversity and better gender opportunities—including by way of quotas for a period of time—they will make the difference. And that is why I am not shy about stating my views. I know that sometimes irritates the boys, but the abuse has to be redressed. Once that is the case, we are on a better playing field. Then fine: “Let everybody compete according to their respective merits.” But as long as you have that much of a discrepancy, then the models tend to replicate, duplicate, propagate. And if you have many, many mentors who are men, many role models who are men—who will the young girls look up to?

IP: Which instruments do we have at hand that can drive the social change you are talking about? Is it acting as a role model yourself, as a woman, or rather that you set rules inside your own organization in the hope that others follow your lead?

Lagarde: I think all of it. Look at what has happened in the Nordic countries. If we look, for example, at the number of female board members in Norwegian companies. Or when I look at my own country: since rules were passed in Parliament to increase the number of women in municipal councils—and also in the Senate—the picture is changing. Not in one go, but it is changing. But for that, all of the above is necessary: the right role models, the right rules, checking the rules, making sure that they are implemented, and including everything. I am convinced that it is not only the women who support the cause of better gender equality; it’s women and men. And we all have to gain as a result of that.

IP: How important of a role do you play as the first woman in charge of the International Monetary Fund?

Lagarde: Well, I have heard from others that I am one of the few role models around. That gives me added responsibility to do a good job and to not be shy about what we just discussed. 

The interview was conducted by Henning Hoff, Joachim Staron, and Sylke Tempel.

CHRISTINE LAGARDE is managing director of the International Monetary Fund.

 

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