Boards of Directors Need Quotas for Women

Countries around the world should follow Norway’s lead and require corporations to allot a certain minimum percentage of board seats to women. Pro or con?

Pro: The Quota Already Delivers

The financial crisis demonstrated the testosterone-fueled excesses of monocultural boards. Would it have happened if Lehman Brothers was instead Lehman Sisters?

Women’s access to boardroom seats is alarmingly slight, particularly in the U.S. and U.K. In the FTSE (Financial Times and the London Stock Exchange) 100, for example, 12.5 percent of directors are women, a tiny improvement on the 12.2 percent in 2009 and 11.7 percent in 2008.

The idea that not enough capable women exist is a red herring. There are plenty of talented women, but finding them may require headhunters to look beyond male-dominated networks.

Within the FTSE 250, more than half of firms have no female directors. On some boards, the absence is shocking, given that women dictate more than 80 percent of household purchasing decisions. And the idea that women may struggle in harder-edged environments is another fallacy. Women head up Archer Daniels Midland (ADM), DuPont (DD), Sunoco (SUN), and Xerox (XRX)—hardly touchy-feely organizations.

Evidence suggests quota systems are effective. Initially, the introduction of 40 percent boardroom quotas for women in Norway generated an outcry against "reverse discrimination," and there were dire predictions it would ruin the competitiveness of the economy.

These fears proved completely unfounded. In 2010, the World Competitiveness Yearbook ranked Norway No. 7—up four positions from the 2007 pre-quota period. Indeed, the current proportion of women on Norwegian boards is actually 44 percent, 4 percent higher than the legal requirement, suggesting that boards have digested the new quota quicker than expected. Ironically, the very debate about quotas has the power to shift mindsets.

Norway’s solution is a good one. Quotas facilitate a revolutionary breakthrough. So far, nothing else has worked. Why not try the Norwegian solution in the U.S., U.K., and other nations? It seems to have surprised everyone with its simplicity and effectiveness.

Con: It’s Not That Simple

Quotas are a bad answer to the wrong problem. Why the wrong problem? Because the lack of women on boards is a symptom, a consequence of the huge underrepresentation of women at top executive levels. The proportion of female employees falls off dramatically at the higher reaches of corporate hierarchy. And that is where organizations recruit the majority of future board members.

In pioneering the introduction of quotas for women by setting a minimum requirement of 40 percent, Norway has seen no corresponding improvement in the number of women in senior line management positions, according to research by Egon Zehnder. In other words, quotas have not remedied the root problem of helping women climb the executive ladder. Legislation may even deter ambitious women from taking on leading executive positions by offering them a direct route to nonexecutive positions.

Apart from targeting the wrong issue, quotas also generate problems of their own. They risk alienating established board members—not just the men but also the women who come up "the hard way." Incoming women will find it difficult to earn the respect of people around the boardroom when their appointment is known to be quota-driven. In Norway, the new appointees were quickly dubbed "golden skirts."

The quota system also presents a real career risk for new appointees. Women will come in feeling they cannot afford to make a wrong move, but at the same time desperate to prove their worth. The performance of new appointees is under intense scrutiny, and should other board members either discount or criticize them, no one will know for sure whether a legitimate reason—or discrimination—is the motivation. Law firms surely foresee future business as a result of quota systems.

Coercion and quotas do not solve the underlying problem of promoting women to influential line positions. On the contrary, they let firms off the hook.

Opinions and conclusions expressed in the Bloomberg BusinessWeek Debate Room do not necessarily reflect the views of Bloomberg BusinessWeek, BusinessWeek.com, or Bloomberg LP.

Reader Comments

Chuck Mitchell

Seats on the board(s), like all other things in life, should be earned and not granted/given because of one's sex, ethnic background, or other wild schemes that liberals can dream up. There are many good women in business today who have earned their way based on their intelligence and hard work. A quota system, which I would expect from a socialist country like Norway, degrades the achievement of these competent women, given those not qualified for a position they haven't earned. America and its businesses need to get government out of the picture and let free markets dictate solutions, recognizing the achievements of all individuals for their achievment(s).

hank

I think you need to look more closely at your rationale--just because a man was CEO of Lehman Brothers at the time of its bankruptcy doesn't necessarily mean that it wouldn't have happened had a woman been in the CEO role or if there had been a quota of female directors on the board.

Don't forget the CFO was female, or have you conveniently forgotten about Erin Callan?

For the record I believe in meritocracy regardless of gender. I have had both great and terrible bosses over the years from both genders.

don bruce

This is a leftover from the PC error of the last century. We need diversity of thinking, not a quota for females, short people, blacks, Chinese. This is nonsense. Women can be blockheads just like men. We need creative, insightful individuals whatever their external characteristics.

Francesco Querini

Quotas for what? We need more ethnic people at the board, it doesn't matter if white/black/brown/red/yellow or rainbow. Equally we need men and woman. Competent people independent of gender or race are always necessary. To be invited or acepted based in the necessity to feed a quota is a shame to the person invited. Meritocracy right now!

Alexia B

Sounds like the men are scared. The fact is things aren’t equal without quotas. Quotas aren’t perfect, but at least they give a chance and break down unofficial barriers for entry. Businesses need diversity, just like campuses who promote scholarships in order to increase their diversity, the scholarships (or in this case quota positions) still don’t come without merit.

Stone

Why don't we do a survey of the population of the United States and whatever ratio is found in the population at large we make it a law that that ratio has to pertain to everything that people belong to. Please give me a break and just put the best people in position that are available and that does include women.

james

Norway is an oil-rich nation, i.e. money grows on trees and is a bad comparison.

Having women on boards that nobody listens to because they have no credibility is no way to move things forward.

Aziz Alfaz

I think what we need is quality. No matter it's man or woman. We should get who has the better quality. And this is the equal opportunity also. Quota systems can't solve the problem.

Payal Chowdhary

There is always a masculine and feminine approach towards solving problems. The board of directors should definitely consist of a good mix of qualified male or female on board. Women have an edge when it comes to emotional quotient. So I strongly recommend the presence of women members on the board.

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