When Norway passed a unique law in 2003, it dispelled a widespread, worldwide perception that the only women to make it inside a boardroom were secretaries. When their law came into effect in 2008 — and made it a lark for women to break through the mythical glass ceiling — it set the corporate world agog. In March, when the European Union mimicked it to issue a pledge, the law made history again.
The EU's ‘Women on Board' pledge is a voluntary commitment to increase women's presence on corporate boards to 30 per cent by 2015 and to 40 per cent by 2020, and applies to all publicly listed companies in Europe. EU Justice Commissioner Viviane Reding is prepared to issue legislation if companies don't comply. "Everyone must come up with creative and credible initiatives to get more women into top jobs — or regulators will do the work for them," she said in a veiled threat, pointing at Norway as an example, although it is not an EU member.
Impressive results
Admittedly, it was a threat that led to Norway's great success with their now famous law: all public-listed companies were warned of forced dissolution if they did not install women on their boards. But the results are laudable: women directors occupy more than 40 per cent board seats at approximately 400 public companies, and more than 25 per cent at large private firms.
To feminists, Norway's move was the boldest to breach one of the most resilient barriers to gender equality. The law is also regarded as the only significant shift in gender balance in Europe's boardrooms for a decade. The Norwegian Quota Legislation for Boards may be an apt recognition of women, but it is not without rewards to companies and their stakeholders.
Assessing the after-effects, the University of Michigan did a study in Norway. Boards with at least three women outperformed their sector on average returns on equity by 10 per cent, and generated operating profits that were twice as high. Companies with prominent gender diversity ranked high in terms of management quality, innovation, and organisation. When boards recruit enough women, the study said, they make qualitative decisions. According to a McKinsey study, operating results of gender diversifiedcompanies are 56 per cent higher. �
A Goldman Sachs report predicts that closing the gender gap could boost GDP by up to 13 per cent in the Euro zone.
Random voices of dissent have been dismissed with alacrity. When Deutsche Bank chief Josef Ackermann said that a woman's presence on a board "might make meetings prettier and more colourful", his personal stock went plummeting. Italian Prime Minister Silvio Berlusconi referred to Emma Marcegaglia, head of the Confindustria lobby, as a "showgirl" when she said that the dearth of women board-members reflected controlling males. His personal stock has no room to plummet further.
There was more dissent — and dissatisfaction — in Norway when the law was announced, but it died a quick death upon implementation. It is now down to a balancing act.
Intelligent move
The three women directors of Statoil were hailed for their role in exposing the firm's bribery scandal by virtue of asking ‘stupid and awkward' questions. When DNO International appointed two women directors in 2007, the three men on board had an aggregate 66 years of oil experience. The women had none, but were celebrated for their accounting and human resources experience. Oslo's Institute for Social Research says 36 per cent of female Norwegian board-members have a formal university education, compared to 21 per cent of their male counterparts.
According to international analysts, women could have exercised control over some of the excesses that led to the global financial crisis — because they are more prudent, diligent and risk-averse than men. This is a view strongly endorsed by Commissioner Reding: "The financial crisis may have turned out differently if there had been more Lehman Sisters instead of Brothers."
Tellingly, the law has spawned a growing class of ‘professional board sitters' or ‘quota queens' in Norway, widely known as the Golden Skirts. The Centre for Corporate Diversity says an elite group of 70 women occupy more than300 board seats in the country.
Clichéd golden skirts and glass ceilings notwithstanding, Norwegian businessman and former minister Ansgar Gabrielsen puts it in perspective: "This law was not about getting equality between the sexes. It was about the fact that diversity is a value in itself, that it creates wealth." He should know; the law was his brainchild.
QUOTA BY LAW
Legally mandated quotas are necessary if women are to be better represented on corporate boards, a senior Norwegian official said last month. "In Norway, we were not able to make a difference with the voluntary approach," Public Administration Minister Rigmor Aasrud said in an interview with EUobserver. "We increased from5 to 6 per cent, but it wasn't visible. So they passed the law and companies were given two years to implement a 40 per cent quota in the boards. From 2007 to 2009, they increased from 6 to 39.6 per cent. That was very successful," she explained.
She said the voluntary system did not work because male members on selecting committees almost always nominated people from within their own networks, most of whom were men.
While admitting that the quotas represent a form of positive discrimination, she insisted that the women chosen are "well educated" and have "different experiences and younger than their male colleagues."
"In general, the experience in Norway has been good for the companies, more creativity, more innovation, more diversity than before," Aasrud noted.
BALANCING THE ODDS
Only 12 per cent of board members are women at the EU's largest companies, official data shows. In 97 per cent of cases, the board is chaired by a man. The share of female board members increased by just over half a percentage point per year over the last seven years.
"At this rate it will take 50 years before there is a balance (40 per cent of each sex) on company boards," the EU commission said in a recent press statement.
Spain and Holland have similar laws, with a 2015 deadline for compliance. The French Senate plans to debate a bill for a female board quota by 2016. Belgium, Britain, Germany and Sweden are considering legislation. In the US, roughly 15 per cent of board members at Fortune 500 companies are women. In China and India it is about 5 per cent.
