Some people argue that if you add more women to corporate boards, that will lead to bigger bottom lines and better results for women lower down in the ranks. After over a decade of gender quotas in Europe, we learn that greater numbers of women don’t boost corporate board performance and has done little to help younger women.
In 2003, Norway mandated that public companies reserve 40 percent of their board directors for women or risk dissolution. A dozen other countries followed including Iceland, Spain, and France with similar targets but lighter penalties.
The goal of this quota was to change board make up because too few women were reaching the boardroom level and companies needed a nudge from the government to do something about it. They also thought that with more women making company-wide decisions, they would help younger women rise in their ranks.
The Economist finds that that didn’t happen.
First, there is not a direct causal relationship between boards with more women and better-performing companies:
Then quotas are put on the table, proponents often produce “snapshot” studies showing that companies with more women on their boards have better returns and are less likely to be beset by fraud or shareholder battles. But causation is hard to prove. Perhaps better-managed companies have more scope to promote diversity. Equally, when studies are conducted before and after quotas are imposed, the results in terms of companies’ performance are inconclusive. Some studies find positive effects; others the opposite or no effect at all.
They also don’t necessarily lead boards to better decision-making:
A study in France in 2015 based on interviews with 24 board members concluded that the country’s new quota system led to changes in the process of boards’ decision-making. But there was no change in the substance of decisions, such as whether to approve lay-offs. It also found that the process did not change because the new members were women. It was because they were likely to be outsiders.
And women lower in the ranks didn’t benefit any more than if there weren’t more women on the board:
But a study in Norway found the quotas had no effect on the representation of women in senior management in the firms where it applied. The gender pay gap shrunk only for the golden skirts themselves. In Norway just 7% of the largest firms have female bosses. In France, a paltry 2% do—compared with (a still miserable) 5% in quota-free America. And in Germany, women make up just 6% of directors on management boards.
Nor are more women climbing the career ladder. In France, Germany and the Netherlands just 10-20% of senior management jobs are held by women, a share that has barely budged in recent years, according to data from Korn Ferry, a consultancy.
While that’s not good news for those supportive of gender quotas, some fears about the quotas didn’t materialize either.
It was feared that too few qualified women would lead to them being overbooked and stretched thinly. But both men and women are over-stretched.
The boards also weren’t stacked with unqualified women. In Italy, female directors were more likely to have professional degrees and experience than previous directors.
It’s great to see women join corporate boards and bring their diverse experience, skills, and knowledge, but forcing companies to institute quotas is not a panacea to pushing women forward in the workplace.