The Q Question: Should the U.S. Adopt Quotas to increase board diversity?

A big question being considered by those who study corporate governance is should the U.S. adopt a quota system to increase the number of women directors, like they the quota initiatives in Europe?  In 2008 Norway imposed penalties for public and state-owned enterprises that failed to have at least 40% of their board seats filled by women. Spain plans for a similar quota in 2015.

The question was discussed recently at a research symposium hosted by The Athena Center for Leadership Studies and Ethics at Columbia University.  Over 100 participants discussed the topic ‘Should there be bolder policies for diversity at the top?’

Amy Dittmar, Associate Professor at the Ross School of Business at the University of Michigan presented her findings on the impact of firm valuation of mandated female board representation in Norway. The study found that the value of Norwegian firms dropped when adding women to the boards, not because of gender, but because the additional board members lacked experience. Other studies on this social experiment indicate that quota systems may improve diversity numbers, but are not developing stronger boards.

Most of the professors and executives at the conference agreed that quota systems won’t work in the United States. Mona Lena Krook, Assistant Professor of Political Science and Women, Gender, and Sexuality Studies at the University of Washington in St. Louis presented lessons from politics in regard to quotas for women on corporate boards. She suggested five non-quota strategies for increasing female board representation:

  • Training programs: skills and resources
  • Recruitment initiatives: finding candidates
  • Public awareness campaigns: rethink stereotypes
  • Knowledge networks: share strategies and publicizes opportunities
  • Work environments: women-friendly practice

We support Krook’s strategies as positive ways to increase women on boards in the United States, and agree that a quota system will not work in the United States. We think that diversity should be defined by the 20% benchmark. What do you think?