By AMA Staff
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Several nations are saying "enough is enough" when it comes to what they view as a persistent glass ceiling in today's boardrooms. The average percentage of board directorships held by women is just 9.7% in Europe and 15% in the U.S. (Catalyst, 2008). In recent years some European governments have decided that the wait for gender parity on boards has gone on too long, and they're using legislation to compel publicly traded companies to appoint more women to their boards (Wachter 2008).
This trend is sparking a debate about the advantages and disadvantages of such laws and, more practically, about whether more countries will follow suit in coming years. Norway is blazing the trail. It passed legislation in 2003 mandating that public companies address gender imbalance on their boards with the requirement that women hold 40% of the board seats by 2008. Companies that failed to comply faced sanctions ranging from fines to closure. At the time, 6% of directors in Norway were women (Wachter 2008).
The legislation gave companies five years to comply with the quotas and, despite rigorous and vocal opposition at the outset, business has generally complied. Five years later, Norway now boasts unprecedented board representation for women—44.2% in 2008 (Catalyst, 2008).
But the road has not been smooth. Opponents of the mandated quota were incensed that long-seated men would be jettisoned to make room for less qualified women, which, they argued, would damage the country's ability to be competitive in the world market and prevent foreign companies from doing business in Norway (Dearlove and Crainer 2002). The opposition included the Oslo Stock Exchange and the Confederation of Norwegian Business and Industry (NHO), which issued a statement that the quota proposal was an attack on "the basic principle for shareholder democracy, namely, that the owners of a company should be free to elect its board" (Madslien 2002).
Even some successful Norwegian businesswomen disparaged the move, asserting that forcing artificial advancement by mandating gender quotas would interfere with the workings of the market and the natural evolution of women gaining recognition on the merit of their individual skills and capabilities (Madslien 2002).
So far, most of the dire predictions don't seem to have materialized, and, by some measures, the progress in Norway has been remarkable. Over 1,000 women have been recruited—which includes some foreign nationals— for directorships ("Girl Power," 2008). And the NHO now runs a training and networking program for women called Female Future. Of the 600 women who have successfully completed the program, 60% have received invitations to join Norwegian boards. There was an initial scramble to snag qualified women to fill board seats, but one observer noted, "Companies found the local waters better stocked than expected" (Wachter 2008). On the other hand, some women in Norway now hold between 25 and 35 directorships, which begs the question of how effective they can possibly be with so much to juggle ("Girl Power," 2008).
Now it appears that other European nations are following Norway's lead. Australia and New Zealand are currently considering gender parity legislation, and Sweden has a comparable equality measure already in place. Spain also passed similar legislation in 2007 (Tarzian 2007). The Spanish government gave companies eight years to increase the gender balance with the goal of 40 to 60% representation, and it offers incentives in the form of granting priority status in the rewarding of government contracts (Wachter 2008). While Spain has already made gains in the number of women holding political office—50% of the government's ministers are women—the percentage of women in board seats in Spain is currently 6.6% (Catalyst, 2008).
These developments have only sparked further debates about the role of government and the impact of quotas. The argument for quotas can be compelling, especially when considering the glacial pace at which things are currently progressing. Case in point: A paper published in 2008 in the UK asserted that at the current rate of progress in women gaining board seats, gender balance in corporate board directorships will not be realized until the year 2225 (Martin et al. 2008).
Proponents of government mandates also say that it is a proactive way to help high-potential talent up the career ladder, where they may otherwise have been overlooked. A report published by the European Professional Women's Network argued that "quotas are an effective way to accelerate growth of female representation" (European Professional Women's Network, 2008).
And some research suggests that creating diversity on corporate boards by the appointment of more women helps to improve the bottom line. Analysts at Catalyst agree that "women leaders correlate with better financial performance," citing a 2008 study of Fortune 500 companies that found that organizations with higher percentages of women directors, on average, outperformed companies with lower percentages of women directors (Joy 2008).
But opponents of government-mandated quotas tend to believe such solutions are going too far. In spite of slow progress, the UK is holding firm on a more passive approach by encouraging business to voluntarily strive for gender parity (Martin et al. 2008). Executives in the U.S. say that, while there is certainly a place for affirmative action and pressure to raise awareness about breaking down barriers, the issue of gender quotas is an exceedingly complicated subject.
"In general, I am opposed to quotas. I don't feel they produce the best result, and once you start, it's easy to argue for quotas for every underrepresented group," said Sally Narodick, retired CEO of Edmark Corporation. Narodick serves on the boards of several publicly held companies including Puget Sound Energy, Penford Corporation, Cray Computer, and SumTotal Systems.
"I have definitely been a beneficiary of affirmative action laws which helped give women and minorities opportunities for senior management and board positions. It would not have happened for many years without outside pressures. The fact that years of encouragement without mandated quotas hasn't produced much progress is troubling and indicates more work is needed. But I don't think mandated quotas are the right answer."
It's clear that there is no one right answer. In the global marketplace, these legal developments probably ratchet up the pressure on multinational firms to ensure that there are enough qualified women in the pipeline to fill leadership positions. Things might become more clear when the next quota legislation is passed in an important market. And, whether business professionals are for or against quotas, it's difficult to argue that most companies couldn't benefit from more women with C-suite experience (Albert-Roulhac and Breen 2005). Ultimately, this places a greater onus on HR professionals and top leaders to create the kind of effective development, mentoring, and succession planning programs that will ensure that when women do fill the role of top decision makers, they'll be ready to thrive.
The world is taking notice and promoting more women to executive roles. Find out how to break through the glass ceiling with this free AMA webcast.
References:
- Albert-Roulhac, C., and P. Breen (2005). Corporate governance in Europe: Current status and future trends. Journal of Business Strategy, 19–29.
- Catalyst. (2008, July 9). Women on boards in Europe. Retrieved from www.catalyst.org
- Dearlove, D., & S. Crainer (2002, November). Norway's new femme quotas. Chief Executive. Retrieved from www.chiefexecutive.net
- European Professional Women's Network. (2008, June 27). EuropeanPWN BoardWomen Monitor 2008, 9.
- Girl power; business in Norway. (2008, January 5). The Economist, 57.
- Joy, L. (2008). Advancing women leaders: The connection between women board directors and women corporate officers. Catalyst.
- Madslien, J. (2002, August 8). Norway to rule on girl board power. BBC News. Retrieved http://news.bbc.co.uk/
- Martin, L. M. et al. (2008, January 25). Boards of directors and gender diversity in UK companies. Gender in Management: An International Journal
- Tarzian, J. (2007, January 8). Spanish women: Breaking the glass ceiling. BusinessWeek. Retrieved from www.businessweek.com
- Wachter, S. (2008, March). Cracking the glass ceiling. CNBC European Business. Retrieved from www.cnbceb.com
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