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Is mandating gender diversity good for business?

June 5, 2019
Diversity & Inclusion

Gender equality in the business world is a hot topic, and one that’s continuing to garner attention as movements like #MeToo grow rapidly into forces to be reckoned with. The statistics aren’t great – in the United States, only 22% of corporate board seats are held by women, and that number drops to just 15% when we look at the business world internationally. It’s clear that some significant work needs to be done in order to reach gender balance in business, but there are many schools of thought on how to approach it. One that’s been attempted internationally, and now is beginning to have an impact on the U.S. as well, is through government-mandated gender quotas.

In 2003, Norway took the bold step of becoming the first country to mandate that women make up 40% of board representation in publicly-listed companies. Soon after, many other European countries including Finland, France, Germany, Italy, Switzerland and The Netherlands made similar moves. More than 15 years later, the results of Norway’s program are still coming in, and some aren’t convinced that the mandate made any significant progress. While some companies have seen improvements in their bottom line and others have seen a decrease in the gender pay gap, these results aren’t across the board, making it difficult to credit successes or failures to the policy alone.

The United States has largely been slow to adopt any formal policy towards gender representation, instead leaving these decisions in the hands of private companies to make. Progress has been slow but steady, with the proportion of female directors on boards in the U.S. at 22% in 2018, up from 20.4% in 2017, according to a report by J.P. Morgan. Despite these gains, however, the report also found that women are still struggling to make headway at the executive level.

In late 2018, the U.S. took a step towards gender mandates as California became the first state to require companies that are incorporated or based in California and are listed on U.S. stock exchanges to have at least one woman on their boards of directors by the end of 2019, and a representative number of women on their boards of directors by the end of 2021. It’s too soon to tell what the outcome will be, and if other states will adopt similar policies, but it’s clear that discussion of gender equality in business isn’t going away anytime soon.

Because of this, private companies are increasingly taking the lead on gender parity – a trend which will surely continue as employees and customers alike are paying more attention to where a company’s values lie. One recent example: salad giant Sweetgreen announced in May that they would provide 5 months of paid leave to all parents who work for them – a move which some believe may help close the gender pay gap that occurs when women leave the workforce in order to care for their children. Of course, this not only benefits those currently employed by Sweetgreen, thus engendering company loyalty, but it also makes Sweetgreen a highly attractive employer for potential candidates and gives them a boost in the public eye. Talk about a business case for social good.

Although the results of existing quotas and mandates internationally and in California remain to be seen, many believe that it’s highly improbable that the United States as a whole would ever adopt such quotas. Instead, it is more likely that private companies will continue to lead the charge, allowing their values and ideals (and those of their customers and employees), rather than quotas, to drive social progress both internally and externally. It’s not only the right thing to do, but it also makes smart business sense, which is ultimately what will get more companies to jump on the bandwagon.

By Patsy Doerr

Source: Forbes

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