Do quotas work to get more women on boards? Now we know the answer
Business people tend to hate governments telling them what to do, and the quotas on female board members imposed on companies by a handful of European countries are no different. But here’s the thing: If a goal of the quotas is to bring more women into the top ranks of business, they seem to be working.
That’s the view of Rajeev Vasudeva, the CEO of Egon Zehnder, one of Europe’s largest executive search firms. Vasuveda said he’s no fan of quotas, but concedes they’re having an impact. “I’m not a great supporter of quotas but in this case it’s making difference,” he said in an interview. “It has changed the conversation—it clearly has been put on the agenda of companies.”
Norway was the first to introduce quotas for women in 2003, requiring that public companies fill at least 40% of their board seats or risk dissolution. Iceland, Spain and France followed with 40% targets—although with less severe penalties—and other countries have lower thresholds. Last year, Germany became the largest economy to impose a quota, mandating 30% of supervisory board seats be filled by women.
Across Europe, the number of women on boards is climbing, although from a low base. The number of women board members at 734 large publicly traded companies across the Europe is now 23%, up from 11% in 2007, according to EU data. In countries with quotas in place, it’s higher: 44% in Iceland, 39% in Norway, 36% in France and 26% in Germany.
Critics have said quotas lead to women being promoted to board seats prematurely, or the same few women being recruited to multiple boards (in Norway, these women have been called “golden skirts). One 2011 study from the University of Michigan showed that company performance fell after quotas were imposed, in part because new board members lacked enough experience.
But because companies need to respond to the law, they are looking hard for qualified board members to fill the seats. That’s where Egon Zehnder comes in. “If you want want to fill the pipeline of board members, you need to find the next generation of female leaders,” Vasudeva said.
To find those leaders, Egon Zehdner has been recruiting from sectors business hasn’t always looked at, such as government, nonprofits and universities. The firm also is working with companies to help them develop female talent. Egon Zehnder offers a leadership develop program for women, presents courses in unconscious bias for executives and hosts annual “Leaders and Daughters” events, where CEOs can hear from their own daughters about the obstacles women face. Those CEOs often return to their offices determined to change their organizations, Vasudeva said.
The goal of quotas is to get enough women in board positions that they help steer the hiring and promotion of women in their companies, and eventually the changes will ripple across the economy. Norway offers some evidence that it is working, albeit slowly. In 2003, according to the European Commission, 30% of working women in Norway were employed in roles categorized as managers. In 2015, the number rose to 37%.
SOURCE: World Economic Forum