Women on boards key to banking reforms, says new book

There is an undeniable truth expressed in Masters of Nothing the latest mischievous book about the financial crash published earlier this week.

In the book, subtitled The Crash and How It Will Happen Again Unless We Understand Human Nature, authors Matthew Hancock and Nadhim Zahawi claim that unless we recognise how human behaviour affects the ways that companies operate, we will make the same critical errors that caused the banking crisis.

Hancock, former chief of staff for George Osborne, the UK shadow chancellor at the time, and Zahawi, former chief executive of YouGov, the online polling agency, say there is an “urgent need” to get more women into City boardrooms.

They back the idea that women should account for at least 30 per cent of boards and argue that companies should be given just one year to achieve this level of diversity, after which forcible legislation should be introduced.

“The people at the top of banks were engaged in very masculine competition. It can be called the ‘sexio-economic effect’, or, to put it plainly, the ‘my bank’s bigger than yours’ phenomenon”, they write.

Two things make this book interesting. First, it comes from a high-profile Tory backbencher and a successful entrepreneur (rather than a more left-leaning politico); second, it has arrived in British bookshops less than a week before Sir John Vickers’ Independent Commission on Banking is due to report on banking sector reforms.

The authors float all kinds of controversial ideas – such as joint chief executives and 10-year clawbacks for banker bonuses – but none more so than recommending that banks’ retail and riskier investment activities should be separated, ring-fencing retail deposits in the process.

The book is a quick and enjoyable read, filled with insider anecdotes worthy of the Goldman Sachs elevator tweets. My personal favourite is the authors’ claim that Sir Fred Goodwin, when he was chief executive of Royal Bank of Scotland, believed it a disciplinary matter if pink wafers were served with afternoon tea.

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