Risk & Economy » Diversity » Lagarde says female leaders key to global prosperity

Christine Lagarde is in many people’s eyes the most important woman on the planet. Although Angela Merkel and Theresa May occupy the two positions above her at the top of the Forbes list of the world’s 100 most powerful women, both have seen their powers diminished in recent months.

In contrast, Lagarde’s star has continued to rise since she was made managing director of the International Monetary Fund in 2011 and re-elected to the role in 2016, becoming one of the key personalities on the global stage. In the build-up to the forthcoming Financial Director diversity and resilience summit, she tells the magazine why female leaders are vital to the world’s future prosperity.

Lagarde says organisations that operate with a diverse lens are more likely to succeed. “When there are 50% women and 50% men, they should want to mirror society, because it is their constituencies, membership or customer base,” she says. “Given there is equal talent, irrespective of gender, why should any group not want to access that big pool of talent.”

“Diversity, by way of different genders, colours, religions, educational background, enriches the process by which you bring views together, they are then debated and you arrive at a good decision, having taken on different perspectives because you see the world with your own sex, colour, religion, background, family circumstances,” she adds.

On the eve of the World Economic Forum in the Swiss mountain resort of Davos, where Lagarde is the most visible and vital member of the world’s biggest congregation of business and political leaders, she says: “It has been demonstrated across the board in all categories of companies, that diversity is good for growth, productivity, diversification of the economy, and it reduces inequalities.

“I don’t know many policymakers who do not want growth, who do not want to reduce inequalities and who do not want to have a diverse economy so that they have a more solid base,” she adds.

Attacking groupthink

When she quipped that the investment bank Lehman Brothers might not have collapsed if it had been Lehman Sisters, Lagarde was alerting us to the danger of groupthink that we now know played a big part in the financial crisis. “It would be equally dangerous if it was only Lehman Sisters,” she says, referring to the now famous off-the-cuff remark, before confirming: “Diversity of view avoids groupthink.”

Lagarde offers a view on how a female approach has been demonstrably successful in investment. “Women in charge of portfolio management tend to be far more successful in terms of performance, so they deliver a better return, because their risk-taking attitude is different to men. If you look at how they organise themselves- the rotation of portfolio is much lower, the risk-taking is more thoughtful, and the fees associated are lower.

“Managing a portfolio is one component of a financial institution’s activities, but taking risk, assessing risk and being mindful of fees associated with actions and the timeframe in which action is taken, is improved when you bring in more women,” she argues.

Does it alarm her that the number of female leaders has plateaued after years of growth? “Of course”, she says. “It’s a big concern because you need to have representation at all levels of an organisation, setting standards, of being mindful of the entire landscape. Sitting at the top, they can be role models and can inform the views of team decision-making, which is why we need the most granular data about woman’s participation and women’s wages,” she says.

Lagarde, a former lawyer turned politician who has held a number of key posts in the French government, asserts that companies should be recruiting men and women in equal numbers. She says employers need to be attentive to ensure there are enough benefits and adjustments for parents to develop careers. “By the age of 40 women should be in leadership positions, but where are the women, surprise, surprise they’ve just dropped out,” she says. “That’s why it has to be comprehensive.”

On gender quotas for senior roles, a path more countries are considering, Lagarde is totally committed. “When I was 25 beginning my professional life, I was dead against quotas, I’m now dead in favour because otherwise it will take way too long- and quotas work. When there is almost parity you can drop the quotas, because there are then enough women throughout organisations to encourage other women,” she says.

Raising productivity

Referencing her experiences in the French political system that features a required balance between men and women on the electoral list, and the French corporate sector, where since 2008 boards have needed to be populated by a fifth women, she says: “Five years later its 30%- so that has worked.”

“Everyone wins, because if you increase productivity because of this addition of talent brought about by diversity, you increase the overall pie and therefore wages should increase for all, in a perfect world.”

Is there an argument that more women across the work environment could benefit the global economy, especially in tougher times? “That’s when you call the women-to sort out the mess,” she replies with a big grin. “I still have to see a reason not to go for diversity, not to hire or promote women, I haven’t seen any of that. It’s all to the upside, so why take the risk of not having the upside,” she adds.

Lagarde says she will press the case for greater female workplace participation as “part and parcel of potential remedies” for negating any weakening of the global economy, a message she will surely take to Davos.

She remains relatively upbeat despite the mix of US-China trade wars and Brexit that threaten to derail the global growth spurt of recent years. “Growth is weakening a little bit, but it’s a modest weakening. The economy overall has grown at 3.7% in 2018, which may be possibly a little less in 2019 and 2020.”

On US-China trade relations, she says: It’s a threat and a risk to an economy that is growing.” On the Chinese economy she adds: “China’s growth is slowing down and is slowing down appropriately, you can’t grow an economy at 9% for decades without taking massive risks.

“We had more threats looming a year ago, some of them materialised. But we are seeing also an effort to address some of those threats from last year. I know people will try to see it as dark as possible because it is flavour of the day to be dark and negative, but I’m moderately negative,” she adds.

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