Have Quotas Put More Women On Boards?

With International Women’s Day approaching March 8, the latest Economist has a timely look at the progress made by women joining corporate boards in the last decade.

It was 10 years ago that Norway decreed that 40% of the directors of listed companies must be women. At the time, the percentage in major countries was around 10%.

Despite the furore that followed, many other countries adopted quotas.  Belgium, France and Italy joined Norway in threatening dissolution and/or fines; Germany, Spain and The Netherlands joined up, but without sanctions. The Brits offered guidelines, North America demurred and the developing economies were too busy developing.

So. Has it worked?

Statistically, you would have to say a qualified Yes. Belgium, Germany, France and the Nordics today have 30-40% women on the boards of large, listed companies.   But success seems to be driven to an uncomfortable degree by regulation.  Without the cudgel of quotas, for example, most countries, including the world’s largest economy (no, not China yet)  cannot do better than 20% participation from women, only 3% better than the global average.  That 17% global average is not expected to hit 30% before 2028, another 10 years.

Overall, the results of a decade of tub thumping and solid, meaningful effort by interested groups is disappointing and puzzling. In OECD countries, college and university graduates are 58% women yet they don’t make it to the top of the corporate world in anything like those proportions.

On the plus side, early fears that quotas would result in tokenism and the appearance of a few highly qualified women on multiple boards do not seem to represent an issue. According to the Economist, 19% of women directors sit on three or more boards, not a whole lot more than 15% for men.

Two red flags

While it is encouraging to see the incidence of women directors in the 30%-40% range, there are two, non-statistical areas which stand out.

First, studies in at least six countries suggest there has not been the expected impact on company performance, decision making or stock market return.  A core argument for more female directors has been the value of a women’s business perspective and beliefs to offset or balance those of men to the betterment of the organization. Recent studies have been inconclusive.

Second, it was generally assumed that having more women at the top of the ladder would have a trickle-down effect resulting in women filling more managerial and leadership positions in the hierarchy.  Data from Korn Ferry suggests otherwise. Studies in France, Germany and The Netherlands show that just 10-20% of senior management positions are filled by women, a share that has not moved for several years.

And in the US of A? Much of a muchness:  a 49% share of the college educated workforce for women, but less than 9% of top management positions in S&P 1500 firms.  In the World Economic Forum’s 2016 Global Gender Gap Index of 144 countries, the U.S. ranks 26th in women’s economic participation and opportunity and 73rd in women’s political empowerment.

Not what you would call a shining example to the world.