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Why board quotas are no friend to women workers

February 19, 2018
Diversity & Inclusion

Since the days of the Vikings, when they farmed while men marauded, Norwegian women have played a big role in their community’s economy. So it was fitting that, ten years ago, Norway pioneered a policy to deal with a stubborn gender gap: the dearth of women directors on company boards.

Amid objections from shareholders, Norway introduced compulsory quotas requiring stockmarket-listed companies to give women at least 40% of their board seats (up from less than 8% in 2002), or face dissolution. Critics, including this newspaper, decried mandatory quotas as the wrong way to promote women. But they have caught on. In Belgium, Germany and France women make up 30-40% of board directors in large listed firms, three to five times the share of a decade ago. In America, which has no quotas, representation has inched up to 20%. It is no surprise that companies follow the rules rather than face punishment. But does the spread of women in the boardroom justify the quota system itself?

The good news is that quotas have not borne out their critics’ fears. Those who opposed them said the idea of token non-executives was demeaning for women, who would prefer to rise on the basis of merit rather than sex. It also jeopardised corporate governance, the sceptics warned, by putting women in positions for which they were possibly underqualified, or staffing several boards with the same clique of high-achievers—known disparagingly as “golden skirts”.

The evidence suggests otherwise. In large listed European companies “golden trousers” are almost as common: 15% of male directors sit on three or more boards; 19% of women directors do. Compared with the clubby, white-maned boards of old, women bring youth and foreign experience.

Yet, the evidence so far also undermines the business case for quotas. Studies from at least six countries on companies’ performance, decision-making and stockmarket returns fail to show that quotas make a consistent difference, good or bad. That has not stopped pension funds lobbying for more inclusiveness. In Britain they are urging some listed companies to give women 30% of boardroom and senior-executive jobs.

Ms-ing the point

That highlights a problem with boardroom quotas. They are a distraction from the task of advancing the prospects for women further down the career ladder—which really could make a difference to women and the companies that employ them. In Norway only 7% of the biggest companies have female bosses. In Britain, France, Germany and the Netherlands 80-90% of senior-management jobs are still held by men. In rich countries the median full-time wage for women is less than for men, because more women have lower-paid jobs. You might think that a larger number of women on boards would help right these imbalances. So far they have not.

The wrong response to this would be more mandatory prescriptions, such as quotas. The workplace is too complicated for that. At the very most they should be voluntary and temporary tools to accelerate progress, not permanent fixtures. Other proven policies are a better bet. Fathers should be encouraged to take parental leave, so that child-bearing does not harm a mother’s chance of making it to the top. Variable working hours should become the norm. High-quality child care, and more accommodating school calendars, would help.

Time may yet prove that boardroom quotas are good for the business as a whole. So far, they have been a sideshow. The more important task is to make it easier for more women lower down the company to keep good jobs and fight their way to the top on their own merits.

Source: The Economist

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