quotas

What do China, Japan and the US have in Common?

 
Happy International Women's Day. We want to celebrate the occasion by bringing you this news: France has overtaken the United States' lead role in the number of women serving on the boards of Fortune Global 100 companies -- France 25.1%, US 20.9%, according to a Corporate Women Directors International study.
 
If that's not bad enough, the US joins China and Japan in having the lowest rate of women-held board seats among Fortune 200 companies, according to the International Business Times. Gee, China and Japan are not known for their women- friendly policies. That's some strange company we're keeping.
 
It's true that France's leap in women-held board seats is due to government-mandated quotas, but in just two years the number of women directors has doubled and their 2014 targets have already been met.
 
We don't advocate quotas. We think that American companies should do the right thing and diversify their boards on their own. We've even given them a benchmark: 20% or more by 2020. It doesn't seem like a lot to ask.
 
The US might learn a thing or two from Finland, where women now hold 22% of the board seats. They didn't need quotas to get there. Instead, they took the initiative themselves and put into place diversity oversight.
 
We encourage US companies to find and add women to the boards. Qualified women are ready to serve.

Make Diversity a Corporate Priority

That feisty Viviane Reding. The relentless EU Justice Commissioner pushed forward her agenda to increase the number of women on European public company boards to 40% by 2020. The EU proposals, which met with some opposition by a few EU members, notably the UK, were softened to eliminate sanctions. The proposals were approved by the European Commission and now must go before the European Parliament and national governments before they can become law - maybe in 2014.

Here at home, when the number of women directors increases by even a single percentage point* we whoop with joy. We don't like quotas, but maybe some national clarity on diversity standards would grease the skids for quicker action. SEC commissioners, are you listening?

Of course, real change won't happen until companies make diversity a priority - and that is a slow process. According to the 2012 Board of Directors Survey by Heidrick & Struggles, Women Corporate Directors (WCD) and Harvard Business School, 46% of US directors and 57% of directors outside the US say that board diversity is not a corporate priority. Dr. Boris Groysberg, the Harvard professor who conducted the survey said that, "On many boards, creating an inclusive culture for the organization has not been a point of focus."

While quotas could catapult board diversity to the top of the corporate agenda, male and female directors alike are unenthusiastic about relying on them. However, notes Dr. Groysberg, " “although most female directors do not personally support quotas, they might view them as necessary to effect change."

Short of quotas, keeping the issue alive in the media and on the minds of stakeholders is a good way to get corporate decision makers to think seriously about the gender issue. A committed and organized effort is what's needed to effect change.

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:

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