Governor Jerry Brown just signed a first-in-the-nation law to require all California companies to have at least one female board member by the end of 2019. Women's advocates who celebrate this as breaking a stubborn glass ceiling ignore how women could get cut by the shards.
Already, absent any legal requirement for gender diversity, corporate boards are adding female members. Catalystreports that the share of women on corporate boards increased by 54 percent for global corporations between 2010 and 2015. Women still only held 15 percent of those corporate board positions and 20 percent of those on S&P corporations in the U.S., but at least the numbers have steadily moved in the right direction.
Quota advocates note that more than a quarter of California's publicly-traded companies have no female board members. Adding one woman over the next year, and then one or two more depending on the size of the board before the end of 2021 as the law requires, shouldn't be a heavy lift.
That's true, but ignores how such a quota will impact perceptions of the women who join these male-dominated board. Undoubtedly, many will assume that these new female board members weren't selected on merit, but to fulfill the mandatory quota. Rather than helping women advance, the quota could tarnish the achievements of women climbing the corporate ladder.
The quota's supporters hope this law not only will help the few women added to corporate boards, but encourage other changes, such as increasing female representation in management and closing the wage gap. Yet studies of existing corporate quota systems show disappointing results.
The most robust research exists on Norway, the country that's had a corporate quota system the longest. Since 2008, Norway has required that women must hold at least 40 percent of board seats in any major corporation. A University of Texas study of Norway's policy concluded that “while the reform may have improved the representation of female employees at the very top of the earnings distribution (top 5 highest earners) within firms that were mandated to increase female participation on their board, there is no evidence that these gains at the very top trickled-down.” The study did not find benefits for other highly qualified women who were not appointed to boards. They did not find a statistically significant change in the wage gap or women's representation in management, nor did they find an impact on the decision-making of younger women making career choices.
Another study by two University of Michigan economists, published in 2012 in the Quarterly Journal of Economics, concluded that, while Norway’s quota policy raised female representation on the corporate boards to which it pertained, it “imposed significant and costly constraints on Norwegian firms.” That research found that the women brought on the boards were younger and had less experience than their male counterparts, and those firms forced to increase women’s representation experienced a statistically significant loss in market value compared with other companies that year.
These results shouldn't be taken to mean that women can't make excellent board members or that corporations shouldn't do more to diversify their leadership. Other research shows that companies with more female board members and representation in senior management have superior performance and are more profitable.
Rather, Norway's experience should caution against using quotas to force women into executive leadership. Smart companies will recognize that they benefit from having the best possible leadership, including board members with a variety of experiences and perspectives. Women, who are an increasingly educated segment of the workforce and who likely have unique insights into female consumers who make the majority of purchasing decisions, undoubtedly will be assets. Businesses savvy enough to recognize this will likely be rewarded in the marketplace.
Yet this is a process that ought to continue organically. Progress may be slow, but it's still progress. Women are earning more positions of power on their own, which is a lot more meaningful and powerful than when government tries to shatter the glass ceiling for them.
Carrie Lukas is president of Independent Women's Forum.