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February 2 2010

IWF in the News: Surprise: Forcing Corporate Boards to Have More Women Isn't Good for Business ... or Even for Most Women

Carrie L. Lukas

Norway is on the cutting edge of the gender-equity movement. In 2002, the Norwegian parliament passed a law requiring that women must comprise 40 percent of all companies' corporate boards. Since then, women have gone from holding about 7 percent of corporate-board seats to just more than the legally required 40 percent today.

Feminists promised that forcing companies to put more women in positions of power would usher in big rewards, both for society and for the companies themselves. Yet as this report from the International Herald Tribune details, there's little evidence of an economic boom, and some to suggest that the affirmative-action program is hurting companies' bottom line. Nicola Clark of the International Herald Tribune reports:

Researchers are grappling with some frustrating facts: Bringing large numbers of women into Norway's boardrooms has done little - yet - to improve either the professional caliber of the boards or to enhance corporate performance. In fact, early evidence from a little-noticed study by the University of Michigan suggests that the immediate effect has been negative on both counts. And the sixfold increase in women as directors has not yet brought any real rise in the number of women as chief executives.

The report explains that the women board members are younger and a lot less experienced than the average male director. As the boards grew younger and less experienced, "performance declined" . . . and by a lot: "The study found that companies in Norway actually performed an average of 20 percent worse the year after adopting the quotas, with those companies that were required to make the most drastic changes to their boards suffering the largest negative impact."

And while certainly some Norwegian women gained power as the result of the new mandate, most of the benefits were enjoyed by a small, elite group. Reportedly, 70 women hold more than 300 board seats. That might also help explain why these companies have suffered in the aftermath of the new quota system - with many corporate-board members serving on multiple boards, they are less focused on improving the performance of any one company.

Does this mean that women are somehow bad for business? Of course not. And the article cites another study by McKinsey that found that European companies with three women or more on their executive board outperformed companies with less female representation.

These results aren't inconsistent. It seems perfectly sensible to assume that many companies would benefit from having more women involved at the top: After all, women frequently serve as the family shoppers and financial decision-makers, and women may have unique insights for how to sell to other women. (This gets into uncomfortable terrain, suggesting that women somehow think differently than men do . . . feminists can get away with suggesting such things. If a man did, he'd be labeled a sexist.) Surely profit-hungry businesses are realizing this on their own, which is why women are gaining power through much of the economy.

Yet there's a real danger in forced gender equity, like what's happening in Norway. Many Norwegian companies are finding there aren't enough qualified women available for their boards, and the most highly qualified women are being stretched thin. Ironically, the government helps contribute to there being a smaller pool of experienced women by offering incredibly generous state-provided maternity benefits (46 weeks of paid leave), which encourage many women to stay out of the workforce longer than they would otherwise.

Here's an idea. Why not try true gender equity? Get the state out of micromanaging the makeup of corporate boards. Stop paying women to drop out of the workforce. Trust the marketplace. A truly competitive market will reward businesses that hire the best people, which will surely include a whole lot of women.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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