Worldwide, the call for gender diversity on boards is growing.
Recently, particularly this past year, there has been a lot of buzz about board quotas. Importantly, a number of governments have taken actions to impose board quotas. Since I am an advocate for optimal board governance and board composition for all types of boards, especially for the necessary refreshment of corporate boards when needed, I believe diversity must be top of mind for boards. While, in my opinion, board diversity is inclusive of women, international knowledge and experience, industry knowledge, ethnicity and age, I am focusing here on the current efforts to fuel greater balance within our boards with respect to gender.
I write today to raise awareness about board quotas, and why we all need to pay attention to them, so that together we can be present to the ripples they are creating worldwide. Profoundly, more than a dozen countries, of whom many have/had boards with an average of fewer than 10% female directors, have implemented quotas before seeing concrete results and the impact quotas might have on behaviors, recruiting procedures and on leveling the playing field between men and women.
Board quotas are instilled to commit to improving representation of women on corporate boards, with the hope that this improved representation will trickle down to other gender disparity issues that exist in the business world across industries, within our educational institutions and political/governmental organizations, worldwide. The fact is that in 2015 women are still underrepresented in the leadership roles where they could excel and have an impact, they are not compensated as their male counterparts are, and (of personal significance to me) women’s presence in STEM (Science, Technology, Engineering, Math) is not yet at acceptable levels in many universities.
There is a trend in Europe and Canada to legislate increasing the presence of women in the boardroom, to accelerate a growth that hasn’t happened naturally and organically. The US is watching, and many believe that US quotas are unlikely. The debate that surrounds this trend includes references to the more controversial aspects of affirmative action, and to the long-term benefits of quotas. The statistics show that quotas are affecting immediate change regarding gender diversity in the countries that use them, but there are questions about the long-term benefits and “tokenism.”
A look at (some of) what’s happening with board diversity now:
Alison Smale and Claire Cain Miller reported in The New York Times (March 6, 2015), that Germany “passed a law that requires some of Europe’s biggest companies to give 30 percent of supervisory seats to women beginning next year. Fewer than 20 percent of the seats on corporate boards in Germany are held by women, while some of the biggest multinational companies in the world are based (there), including Volkswagen, BMW and Daimler — the maker of Mercedes-Benz vehicles — as well as Siemens, Deutsche Bank, BASF, Bayer and Merck.”
In this article, Germany’s Justice Minister was quoted saying, “For Germans, (the law is) the greatest contribution to gender equality since women got the vote” (in Germany in 1918).
Norway’s adoption of gender quotas for corporate boards was a first as The Economist explained in “The spread of gender quotas for company boards” (March 2014): A 40% quota for female directors of listed companies came into effect in 2008, and “non-complying firms could theoretically be forcibly dissolved, though none has in fact suffered such a fate.”
Norway’s adoption of gender quotas for boards effected significant change in the short-term for the presence of women on boards, and, according to Danielle Paquette’s article “Why American Women Hate Board Quotas” in The Washington Post (February 9 2015), that change hasn’t yet trickled down to other gender disparity issues in Norway’s business world.
Britain has not taken legislative procedures, yet. Rather, a voluntary initiative was launched in the UK in 2010 called “the 30% club.” Helena Morrissey, CEO, Newton Investment Management and 30% Club founder, states: “Our belief is that, as more women join boards without the imposition of quotas, the more they can demonstrate the value they can add. By the time we get to 30%, the system will be self-perpetuating.”
Canada’s biggest companies were asked in June 2014, following a federal advisory council report, to increase the number of women on their boards, recommending a 30% target for female board representation, but not quotas or regulatory requirements. The approach, referred to as “comply and explain,” requires businesses to disclose diversity statistics, which will hopefully compel the top 500 companies to make the needed progress. Going into 2015, the Canadian province of Ontario took the lead to make a legislated change since organizations weren’t voluntarily adding more women to leadership positions.
The United States is lagging. As stated by Fortune (January 13, 2015), “Globally, women gain corporate seats — not in the US.” According to the Catalyst 2014 Census index, 19.2 percent of the board seats of S&P 500 companies are held by women and the US is not aggressively moving the needle.
Progress is slowly being made in the US to recognize more women as viable board candidates, and a number of initiatives are demystifying the process and expediting the diversification of American boards, such as The Thirty Percent Coalition, 2020 Women on Boards and The Alliance for Board Diversity.
I looked up Merriam Webster’s definition of “quota.” The first definition made me cringe, “an official limit on the number or amount of people or things that are allowed.” In my opinion, in the 21st century, limitation or containment should not be how we should have to pursue optimal board composition and a natural balance of skills within our boards.
The second definition of quota is, “a specific amount or number that is expected to be achieved,” which didn’t resonate with me as an acceptable way to speak of having women at the board table and in leadership positions. Numerical requirements don’t feel empowering. Empowerment comes from inviting women because of how they as individuals can significantly contribute as board directors.
The third definition is, “the number or amount constituting a proportional share,” which also didn’t feel right to me. Board composition is not about a proportional share, but rather achieving the optimal level of diversity prioritizing knowledge, experience, education and international ties– and then ensuring that there is no discrimination vis-à-vis gender, ethnicity, age and race.
As a woman who intends to serve on more boards and has advised boards of different types and sizes, I have observed and have fully experienced that women have been and are still underrepresented in the boardroom. Point in fact is that most of my board clients have been males. Most of the public/corporate boards I have worked with were predominantly men, while most of the non-profit board clients I’ve served have had a greater balance of men and women. Yet personally, I have rarely seen or experienced open discrimination against women in the selection process for new board directors.
I have observed and experienced the benefits having just one woman on a board can offer an organization (and there is research that supports what I’ve seen first-hand). While most of my corporate board clients have been males (99%), when I have suggested that they increase diversity, they all have welcomed this recommendation, and their primary question has been how to find the right talent with the skills that they were looking for as they were augmenting or refreshing their boards.
In conclusion, the debate is hot, and there are strong arguments for and against board quotas. I want to look at the issue from another angle, talking directly to the people who make up some of the statistics, so I’ll follow up with a second post including comments from polls I conducted in early April 2015.
It is important that men and women in leadership positions and on our boards, worldwide, understand how countries are approaching gender diversity. Gender diversity on our boards should not just be considered “fair.” It is good governance. Period.