Affirmative action for everybody, except for white heterosexual men!
Norway enacted the first board gender quota in December 2003, requiring public limited companies’ boards to be comprised of at least 40% of each gender by 2008. Noncompliant firms faced stiff penalties such as delisting, nonregistration, and fines. All firms complied by the deadline; however, this “hard quota” success may not be generalizable to other countries’ “soft” quotas.
A “hard quota” refers to a binding instrument that prevents companies lacking a gender-balanced board from remaining listed on a stock exchange, and compensating the board members or even operating. In contrast, a soft quota is not binding; hence, a firm that lacks a gender-balanced board can continue to operate, and only faces recommendations, warnings, and reports on the causes of noncompliance, or receive tax rebates and/or public subsidies for compliance, as in the Spanish case.
Inspired by the Norwegian quota’s success, the 2007 Spanish Gender Equality Act was the second quota law to require large firms to appoint at least 40% of both genders on the boards, but unlike the Norwegian quota, the Spanish quota does not establish negative consequences for companies that fail to meet the target. Indeed, the Spanish Act only provides the incentive that the government may show preference in awarding public contracts to firms that follow its guidelines, thus following a soft approach (soft quota).
Nonbinding legislation and self-regulatory initiatives are typically preferred by policy-makers who seek to limit political opposition to quotas. However, does such nonbinding legislation really work, at least in the short to medium term? Enough time has passed to determine whether the pioneering Spanish Act achieved the expected outcomes.
Other European countries later adopted some kind of quota. In 2010, Iceland passed a law on board gender quotas (40%) on the boards of all companies with more than 50 employees. Icelandic law does not include punitive sanctions for noncompliance, but new companies must follow the 40% gender balance regulation (Arnardottir & Sigurjonsson, 2017). A year later, France passed a law requiring a gender balance (40%) among the nonexecutive directors of the largest companies (Zenou, Allemand, & Brullebaut, 2017). Similar laws (33%) passed in 2011 in Belgium (Levrau, 2017) and in 2012 in Italy (Profeta, Aliberti, Casarico, D’Amico, & Puccio, 2014). In Belgium, France, and Italy, noncompliant firms can be fined, dissolved, or banned from paying directors. In particular, in Italy, in the event of noncompliance, a progressive warning system with monetary fines culminates in the eventual removal of the board (Profeta et al., 2014). The Netherlands introduced a 30% gender quota in 2013 for the corporate boards of large public and limited liability companies (Kruisinga & Senden, 2017). Similar to Spain, the Netherlands enacted “soft” quotas without sanctions. In 2015, Germany set a 30% quota for companies that are listed or that are subject to full co-determination (Kirsch, 2017), requiring board seats to be left unfilled if qualified women cannot be found. In 2017, Portugal and Austria also implemented quotas. The Portuguese quota required at least 33.3% women for listed companies. Noncompliance may lead to fines. In Austria, the quotas target listed companies as well as companies with more than 1000 employees and require the supervisory board to be composed of at least 30% women. The sanction for noncompliance consists of the nullification of appointment.
From Wikipedia, so take it with a grain of salt.
In 2006, the Norwegian government introduced quota legislation that required both public and state owned companies to have 40% female board representation by 2008. Failure to comply resulted in fines or company closures. Full compliance was achieved by 2009. The percentage of female board members has since remained between 36% and 40%. Iceland and Spain have introduced legislation requiring 40% of female board representation on publicly traded companies. Finland requires 40% of state owned enterprises to have female directors for 40% of their board seats. The Netherlands requires public companies with more than 250 employees to have female directors for 30% of the board seats.
In France, a bill was passed in 2011 requiring 40% female directorship by 2016. This quota is to be implemented on two schedules, one for private companies and one for public companies. Public companies will require 20% female board representation within three years, and 40% within six years. Private companies will have nine years to reach the 40% quota. Failure to comply with these schedules will result in voided nominations and suspended remuneration of board members.
Italy requires public companies to have 33% of either underrepresented gender.
Belgium passed a law requiring 33% female directorship by 2018. Failure to comply with these schedules will result in voided nominations and suspended remuneration of board members.
Quebec’s Bill 53, passed in 2006, is the only provincial legislation currently in effect in Canada that deals with gender representation on corporate boards. This bill requires an equal number of men and woman on the boards of Crown corporations.
California passed a quota law in October 2018, for women on boards of companies headquartered in California, with deadlines in 2019 (for two women on five-person boards) and 2021 (for three women on seven-person boards). It is expected to be challenged as unconstitutional on grounds it violates equal protection.
The proportion of board seats held by women in Europe varies significantly. In the Scandinavian countries, Norway leads the way with 35.5% of board seats of the companies in the OBX index held by women. Finland is in second place with women holding 29.9% of board seats on the companies in the OMX Helsinki 25 index. In Sweden, 28.8% of board seats of the companies in the OMX Stockholm 30 index are held by women. Women also hold 21.9% of board seats of the companies on the OMX Copenhagen 20 index in Denmark. In France and Germany, women hold 29.7% and 18.5% of board seats of companies on the CAC 40 index and the DAX index respectively. In the United Kingdom, among the companies in the FTSE 100 index, women hold 22.8% of board seats. At the other end of the scale, women hold only 10.3% of board seats in Ireland and 7.9% in Portugal.
Impact and criticism of gender quotas
The use of gender quotas as a mean of rectifying disproportionate gender representation on corporate boards has been controversial.
Gender diversity on corporate boards had been proven to have a negative effect on company. Some studies have found gender quotas to be beneficial, including through its positive impact on the appointment of a female board chair and a female CEO. However, others argue that quotas inadequately address the larger structural issue known as the glass ceiling. A working paper on the female labor market in Norway found that although a mandated quota led to an increase in female directors, it did not affect female employees of lower positions. Board members are typically appointed in one of two ways: (1) internally, through in-firm appointments of high level executives such as CEOs; and (2) externally, through appointments made from outside of the firm. Quota systems simply affect gender representation of the board and might not affect the number of women who reach the internal pool from which candidates are appointed. So even if there is greater gender diversity on a corporate board, the pool from which candidates are chosen remain disproportionately occupied by men.
For example, Norway’s quota system has significantly increased the number of women on corporate boards. However, the quota may not have altered the way women progress through organizations. In 2013, Norway’s public companies had 41% female board representation but women made up only 5.8% of general managers at the public companies. In the same year, at the CEO level, only 6% of listed companies in Norway had a female CEO.
Nevertheless, the disparity between internal and external appointments to corporate boards also arises in jurisdictions that have not instituted a quota system. For example, in 2013, 48% of the female executive directors in the United Kingdom were internally promoted, compared to 62% for males.
The Frankfurt School and Critical Theory – Cultural Marxism