Why Corporate Women Are More Likely to Blow the Whistle

Photograph of Sherron Watkins by Dave Einsel/Stringer/Getty Images.

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When Enron whistleblower Sherron Watkins was one of Time’s 2002 "People of the Year," the magazine asked her whether she thought women were somehow more ethical than men. She said no, venturing only that perhaps society's reduced expectations for women in business freed them from some of the peer pressure that prevented men from speaking out against crooked practices at their workplaces.

Seven years later, Watkins says her thoughts on the issue have "crystallized considerably." She thinks women are more likely to blow the whistle than men, for reasons that have as much to do with nature as with nurture. Some research supports her new stance, and also suggests that the way that women report corporate violations is different from the methods that men use.

The financial crisis has brought with it enough women lie detectors to convene a veritable Davos of Bitches Who Told You So. There is Brooksley Born, the former chairman of the Commodity Futures Trading Commission who spent three years pushing for regulation of over-the-counter derivatives only to be struck down repeatedly by Alan Greenspan, Larry Summers, and Robert Rubin. There is Sheila Bair, the only government regulator in either administration who can credibly claim to have seen the crisis coming. And this month brings us news of Genevievette Walker-Lightfoot, an SEC attorney who labored in vain in 2004 to get the agency to dig deeper into Bernie Madoff's questionable investment operation.

To be sure, plenty of men have also blown the whistle during the years that preceded the current crisis, from egalitarian short-seller David Einhorn to Harry Markopoulos, who wrote a detailed 21-page memo titled "The World's Biggest Hedge Fund Is A Fraud" to the SEC in 2005 (only to be dismissed—by a female SEC attorney in another branch of the agency). But a statistics-minded observer might expect nearly all of the contrarians and dissenters to be men, given the pitiful representation of women in the upper echelons of finance—not one among the 18 "major figures" of the credit crisis cited on the New York Times page dedicated to the topic is female.

Watkins became convinced whistle-blowing was one of the few types of "risk" that come more naturally to women after meeting Judy Rosener, a management professor at the University of California at Irvine. Rosener is best known for a somewhat controversial 1990 Harvard Business Review article that encouraged working women to stop imitating men and embrace "a woman's way of leading." While academic studies in fields ranging from management to neuroscience had linked maleness and male hormones to an increased propensity for risk, Rosener draws a distinction between the types of risk one takes with encouragement from an audience, and the types of risk one takes in spite of the disapproval of the audience. Watkins calls these "arena risk" and "moral risk." Women, she contends, are more likely to take the latter form of plunge. Watkins says she was taking a moral risk when she wrote her now-famous memos to the late Ken Lay, warning that the company could "implode in a wave of accounting scandals" if he did not get a grip on the dire cash flow problems concealed behind its inscrutable financial statements.

Is there a biological basis for Rosener’s theory? In a widely cited 2008 study of hormonal fluctuations in the saliva of 18 male traders on a London trading desk, researchers found consistently elevated levels of testosterone on traders' profitable days. (Only men were tested because there are so few women traders.) Also, scientists found elevated levels of the "stress hormone" cortisol among the men in more uncertain, volatile markets. The researchers extrapolated that the self-reinforcing interplay between the two hormones might provide some biological clues to why the "good times" in overheated markets last so much longer than fundamentals could ever justify, while fear and stress take over when the market crashes, prolonging the bad times as well.