Gender quotas

The spread of gender quotas for company boards

WHEN Norway introduced a 40% quota for female directors of listed companies in 2006 … to come into force in 2008, it was a first. Non-complying firms could theoretically be forcibly dissolved, though none has in fact suffered such a fate. Since then gender quotas for boards have been imposed in Belgium, Iceland, Italy, the Netherlands and Spain (though with less severe sanctions: non-complying firms must generally explain in their annual reports why they fell short and what they plan to do about it). The European Commission is considering imposing quotas across the EU. Malaysia has imposed a 30% quota for new appointments to boards, and Brazil a 40% target, though only for state-controlled firms. The governments of several other countries, including Australia, Britain and Sweden, have threatened to impose quotas if firms do not appoint more female directors voluntarily. So why are gender quotas becoming more common?

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One reason is a growing impatience with the glacial pace of voluntary change: women are the majority of all graduates almost everywhere in the developed world, but make up a smaller share of the workforce the further up the corporate ladder they go. Another is that Norway’s quota law has not been the disaster some predicted. «As a principle, I don’t like quotas,» Ider Kreutzer, the former chief executive of Storebrand, an insurance group, told the Financial Times the year after the law came into force. «But I have not been able to find any big problems with the legislation in practice.» Some had worried that they would actually decrease diversity by forcing companies to dive for the same small pool of eligible women, nicknamed the «golden skirts». In fact, Norway still has more «golden trousers»—male directors are twice as likely to sit on more than one board. Nor did it obviously lead to less qualified boards: female Norwegian board members are more likely to have a degree than male ones.

That is not to say quotas are now uncontroversial. Whether you think robust measures to increase the share of women in senior management are a good thing in the first place depends partly on how convinced you are that diversity in management is important. It might improve performance by mirroring the diversity of customers—or, as our Schumpeter columnist recently argued (though about cultural rather than gender diversity), it might increase conflict, worsen communication and reduce workplace trust. Easier to dismiss is the still-common objection that quotas are anti-meritocratic: that is more true of the status quo. Oodles of research demonstrates that women are evaluated less positively than identically qualified men when applying for stereotypically male jobs, such as leadership roles. One study found that a commitment by hiring committees to shortlists with at least 25% women helped to remove anti-woman bias.

Over time, advocates of quotas hope that a sudden large increase in the number of women in leadership will change attitudes. They point to the results of a law passed in 1993 in India that reserved positions for women in randomly selected village councils. A decade later women were more likely to stand for, and win, elected positions in those villages that had by chance reserved positions for women in the previous two elections. But life is likely to be hard for the pioneers. In a review of the effects of gender targets and quotas, Jennifer Whelan and Robert Wood of Melbourne Business School found that …


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