23/06/2014

By Agnes Bamford and Helen Croft, The Results Centre

Women play a crucial role in business, yet they are consistently underrepresented in boardrooms across the country. Introducing a quota system is one strategy that has been suggested as a means of redressing the balance, but it is a controversial solution that often provokes strong reactions. Critics argue that it violates the principle of merit, whilst supporters believe that the quota system is crucial in remedying the gender imbalance.

As with most arguments, there are two valid points of view. Women now account for over 20% of board membership in FTSE 100 companies, but this is still some way short of next year’s 25% target — and nowhere near the ideal of 50/50.

Recent research demonstrates a distinct polarisation in the UK economy. Whilst the liberal market policies of the UK have resulted in more women reaching high-status positions than in Scandinavia where quotas exist, Britain is also the European country where most women are found in low-status positions. So, could the introduction of quotas here in the UK redress the balance – or should we rely on a continued gradual process to achieve that balance?

The Norwegian example

Helpfully, there is a useful exemplar to study. Norway has led the way in the quota debate by passing a 40% quota law for women on public boards. The law, which came into full effect in 2008, provoked fierce opposition at the time, but several years on, the practice has become widely accepted, with other European countries following suit. However, there are still some contentious issues to be addressed.

Proponents of the quota system have maintained that gender diversity is good for business; critics have argued that it represents a blow to competitiveness. The results from data analyses comparing Norway and Denmark indicate some positive effects arising from the Norwegian reform, although the conclusion so far is that the effects on profits are neutral.

Another perspective is that the gender quota system in Norway is a political measure to redress the gender inequalities in power rather than being driven by positive economic effects. This is an interesting angle which raises the question of bias and stereotypes: many would query why this should be considered as a negative. In simplistic terms, if men hold the majority of power and their perception is that women are less capable, women will struggle to gain the power necessary to implement change. A total of 20% of national parliament seats across the world were held by women in 2012, with evidence (Beaman 2009) suggesting that men maintain a bias against the effectiveness of women in politics. The introduction of a quota system bypasses the need to change mindsets through persuasion, offering the opportunity to demonstrate capability on the job.

Playing a long term game

A University of Michigan study found that the increased presence of women on boards in Norway has resulted in slight losses in companies’ bottom lines to date. This may be because the women tended to have less upper management experience. But, whatever the explanation, it’s important to realise that the benefits of long term change take time to filter through.

However, there is also evidence of advancement in companies’ human capital as a result of the quotas, which may result in increased profits in the future. The presence of more women on Norwegian boards has also corresponded with a higher overall education level. This is supported by a study focusing on British corporate boards which confirmed that boards with more women also tend to have better educated members. Furthermore, research documented in the IMF report Women, Work & the Economy: Economic Gains from Gender Equity, cited that the impact of gender equality at any level encourages participation at the levels below, thereby creating a more balanced pipeline for the future — and the possibility of a return to genuinely competitive selection.

Norwegian scholars have found that the presence of more women on boards has led to more focused and strategic decision-making, increased communication and decreased conflict. Moreover, the presence of more women on corporate boards has been shown to improve intra-board communication and overall management style.

Looking at the alternatives

There are other viable measures which should be considered alongside quotas — and which may inspire less controversy.

• Balancing parental leave for childcare. The UK typically offers women up to one year and men two weeks at present. However, in Norway, after the initial 13 weeks post birth taken by the mother, the maternity/ paternity leave period can be taken by whichever parent the household chooses and is not dictated by corporate policy.
• Affordable and / or onsite childcare, flexible working and campaigns to challenge the societal norm that women bear greater responsibility for childcare can all help redress gender imbalance and ease the workplace advancement bottleneck of childbirth.
• Businesses offering mentoring/ coaching/ development programmes for women as standard, making it clear that their progression is proactively supported.

Challenging the mindset

It’s also important to acknowledge that women’s own mindsets may influence their aspirations and pursuit of equal employment opportunities and higher level roles. This is where the introduction of quotas provides a tremendous boost by creating positive role models, making the impossible seem possible. More importantly, the system puts individuals in power who have the understanding and desire to initiate changes which could make the balance of work and home during childrearing years easier to achieve in future.

The ultimate objective should be for quotas in business to become unnecessary. Once there is more equality on boards and women are not deselecting themselves early in their careers, there should be a return to the truly competitive selection of senior positions because there will be an equal and balanced pool of candidates at the sub executive level. At that point, we should see naturally balanced boards where everyone is selected on merit, having had the opportunity to develop and demonstrate their abilities.

However, this won’t happen overnight. Ultimately, the key question relating to quotas is whether the end justifies the means? With the absence of genuine choice and opportunity for many women in business, quotas offer the best chance of rapidly levelling the playing field – which will in turn facilitate a return to the definitive ideal of competitive selection.
Join the debate

The Norwegian-British Chamber of Commerce (NBCC) is running a panel debate on the topic of women on boards in London on 16th October 2014. For more information, visit www.nbccuk.com/events or email line.von.erpecom@nbccuk.com.

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