Getting Women on to Corporate Boards

Review: Getting Women on to Corporate Boards

GettingWomenontoCorporateBoardsThis slim but informative volume contains contributions from practitioners, policy-makers, principle-setters, advocacy groups and researchers on gender balance in the boardroom, the outcomes of the Norwegian quota law and its snowball effects in other countries. The book came out of a Think Tank organized in Oslo in March 2011. The Norwegian quota law demanded a minimum share of either gender of 40% on boards of publicly listed companies, about 1500 corporations as of January 2008.

Norway took a radical approach. The penalty for not meeting the quota was dissolution. No company took that chance. By any reasonable measure, the Norwegian law is a success. Has Norway’s example started a “wave effect” of momentum around the world? I think so, although Norway had a head start over most countries because they already had a strong base of human rights.

In February 2002 Ansgar Gabrielsen, the Norwegian Minister of Trade and Industry, announced that a law should come into force regulating gender balance on corporate boards. Ambitions about achieving gender balance in the upper echelons of Norwegian companies had existed for a long time, as had efforts to attain these ambitions. However, any advances in increasing the number of women on corporate boards had little visible effects. In 1992, only 4 percent of the members of boards in corporations listed on the Oslo Stock Exchange were women, and in 2002 this figure had increased to only 6 percent despite a multitude of voluntary efforts. This was the background for the Norwegian law on gender balance in corporate boards, and in 2008 about 40 percent of the board members in Norwegian publicly traded companies were women.

Yet, a little more background is in order, as explained later in the book. Since 1981 Norway required public sector boards, councils, working groups and delegations must have 40% or more of each gender. In 1993, parental leave was extended to 42 weeks and in 2004 paternal leave was increased from four to ten weeks. The United States, where I originate this review, is far behind the Norway of 1981 in many respects. Contrary to the discussion The Norwegian initiative was initiated not for economic reasons but to address societal needs for justice, democracy, participation, equality and human rights. In comparison, our country feels so crass. The ‘bottom line’ is almost always money.

Ansgar Gabrielsen was the Norwegian Minister of Trade and Industry and has been considered as the father of the law. He proposed it in the press without informing the Prime Minister, the Minister of Equality, or the leaders of his political party. Of course, enactment took the effort of many. I found discussion of behind the scenes struggles fascinating, especially the interviews with Laila Dåvøy and Kirsti Bergstø who were the Norwegian Minister of Equality in 2002 at the time that the law proposal was introduced and the State Secretary in the Ministry of Equality in 2012 respectively. Pity, we have no equivalent offices here.

Laila Dåvøy discussed early efforts at benchmarking, creating networks, awareness, board training and databases of well-qualified women. Kirsti Bergstø writes, “Human capital is a vital part of our economy and represents close to 80 percent of our national wealth. Oil only accounts for 7 percent. Therefore, it is important how we make use of our hands and heads.”

I can highly recommend the use of quotas if you combine equality policies with modern, gender-neutral family laws; parental leave and fathers’ quotas; full coverage of early childcare places at an affordable price; and the flexibility in work life for parents with sick children. Quotas are not a quick fix to achieve gender equality in business life. Quotas are only effective if such welfare measures are in place… we would never have seen such a rapid increase in the number of women on company boards without the use of quotas. Profound political will is necessary… This is about the redistribution of power.

We in the States start from such a weak base. Human labor is too often seen as an expense, rather than as capital. Childcare at an affordable price? Mandatory sick leave? These are distant dreams.  In Norway, voluntary action did not succeed in increasing the number of women on corporate boards, but the quota law worked.

Silke Machold, a UK professor of corporate governance, points to the importance of advocacy organizations such as Catalyst, consultancies such as McKinsey & Co., along with Deloitte, Ernst & Young, the Boston Consulting Group, PwC and Accenture, as well as Bloomberg and GMI (Diverse Director DataSource) routinely compiling data and bringing it to the attention of chairs, investors, and board nomination committees. Elbjørg Gui Standal writes of her experience with ‘Women in Business,’ and teaching courses in board competence, which 3500 have taken, and the value creating board.

Elin Hurvenes tells of her experience founding the Professional Boards Forum. In approaching current board chairman to find out what was holding women back, she was told by a bank chairman, “We look to appoint someone we know we can work with.” Like others, she gives a fascinating account of her experience and points to some of the well documented contributions made by increased women board members:

  • increased level of pre-meeting preparation
  • added to the width and quality of boardroom discussions
  • created a more open and less competitive atmosphere
  • led to a more informed decision-making process, reducing risk

The book contains personal stories and research from around the world. Mariateresa Torchia, for example, finds support for the hypothesis that it normally takes a critical mass of three women on a board to effectively influence firm level innovation. Cathrine Seierstad finds a “powerful dislike of the idea of favoritism, of moving the goal posts to make things easier for one’s own particular group,” especially among your women in the least powerful positions. Senior women are the most likely to have experienced disrimination and are the most inclined to endorse affirmative action.

The stories of the Norwegian pioneers were of most interest to me, providing color and a clearer picture of what was involved – more than any piece of statistical research can deliver. However, the book also has much to offer to Americans and others who must argue not for justice but bottom line performance. In particular, Viviane Reding’s chapter cites a handy plethora of studies finding companies with a higher share of women at top levels deliver:

  • strong organizational and financial performance,
  • higher stock price growth,
  • double operating profit,
  • 42% higher return on sales,
  • 66% higher return on invested capital,
  • 53% higher return on equity,
  • higher ethical behavior,
  • creativity and innovation,
  • better use of the available talent pool.

Women control about 70% of global consumer spending. More seniors dependent on Social Security and other pension systems, with fewer working adults, increases social dependency. The EU 2020 Strategy sets a target of raising the employment rate for women and men aged 20-64 to 75%. Reducing barriers to career progress would mean higher wages and taxes in support of the growing number of dependents. Whether you are interested in micro or macro issues of economics, politics or justice – it delights.

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