Women and Quotas: Will It Break the (Plexi) Glass Ceiling?

Posted on Wednesday, March 16, 2011

A debate on boardroom quotas continues to percolate through the European and American media, especially of late. Bloomberg BusinessWeek recently hosted a rather tepid discussion on the topic, while the Financial Times published a more thoughtful set of articles tackling the issue. The fact is, in the U.S. women occupy a paltry 15 percent of Fortune 500 board seats -- and this number has hardly budged for years. The UK's boardroom gender composition has stagnated at 12.5 percent female. In Asia, the number is in the single digits.
With Thursday's release of the Lord Davies report on women in the boardroom, the UK rejected instituting quotas for women at the top of FTSE 100 companies. The Davies panel appointed to review the issue has instead recommended that companies follow "voluntary targets" to hire more women at senior levels. Specifically, the panel recommended that FTSE 100 companies aim to achieve a one in four ratio of women to men on boards by 2015 -- or else quotas should be instituted.
You can just hear the howls of discontent among businessmen (and a few executive women) worldwide: "It's not right! Women -- like their male colleagues -- should be appointed strictly on merit, not because of their gender. Since when should the government dictate to us who should be on our board? We pick board members based on their talent and proven experience in running major companies. It's just a matter of time before there are qualified women."
Well, that sentiment hasn't worked very well in the past few decades, has it? It sounds very much like a pipeline argument to me. Women entered the workforce in earnest during the 1960s and '70s. Most of those women are now getting ready to retire. Today their daughters are in the prime of their careers poised to jump into top management, but they still face a very thick (plexi) glass ceiling. A survey released on Monday by the Institute of Leadership & Management found that three quarters of women in business say there are barriers to them reaching senior management. This is in contrast to 38 percent of men who feel the same.

Norway has had a strict quota law in place for the past three years, although the milder form of it was adopted in 2003. It stipulates that all publicly traded companies must have at least 40 percent women on their boards of directors. Any Norwegian company that didn't comply with the law was threatened with dissolution. (In practice, those that chose not to comply simply took themselves private or moved their corporate headquarters to the UK.)
France has enacted a similar law -- minus the penalties. Disobedient French companies will simply get a slap on the corporate hand. That explains the comment (cited in the May 6, 2010 edition of The Economist) of a senior French board member who said he would use a female candidate's appearance as his primary selection criteria ahead of industry or other relevant experience. Similarly the Swiss CEO of Deutsche Bank, Josef Ackermann, recently came out in favor of putting more women on boards for their ability to make the board meetings "prettier and more colorful."
Patronizing remarks like those are exactly the reason more forceful action needs to be taken. Companies won't change unless someone forces them to do so -- or, as Ines Kolmsee, CEO of chemical company SKW Metallurgie said, holds a "Damocles Sword" over their collective heads. A growing body of research from the likes of Catalyst, McKinsey & Company and others has shown that women on boards bring higher profits, higher quality earnings, better share price growth, better decisions and higher innovation. Moreover, Catalyst showed that companies with high numbers of women at the board level also end up with more women in senior management (compared to companies with male-dominated boards).
So will the UK's voluntary target proposal work? I doubt it. German companies instituted a similar "self-commitment" ten years ago. How'd they do? Last year executive women held just four of the 185 boardroom seats on the German DAX30 -- a shameful 2.2 percent. At that glacial rate of change, perhaps our great-granddaughters will have a shot at true equality in the boardroom.
Frankly, I think that German Families' Minister Kristina Schröder has a far better solution: Like a quarterly earnings report, make companies publicly declare their own goals and timeline for getting women into senior management, and if they fail to achieve those targets, they must explain why. Coincidently, that's also one of the Davies Report recommendations. Now that's holding their feet to the fire!
Dr. Sasha Galbraith, Author and Partner of Galbraith Management Consultants; THE HUFFINGTON POST

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