Many European countries are now looking to emulate Norway’s quota for female board members, introduced first in 2004. A new report takes a look at the effects of that legislation six years on and concludes that many of the original arguments against the measure have not been borne out.
When Norway introduced tough new laws back at the beginning of 2004 aimed at increasing the number of women on company boards, the naysayers said it would lead to disaster. Companies would be forced to appoint less-qualified people as board members just because of their gender, and there would be widespread resentment among male colleagues and business owners.
Six years after the introduction of the 40 percent quota, the great debate the law unleashed has died down completely. The quota has been successful and has gained broad acceptance. What is more, the caliber of women on company boards is just as high if not higher than their male counterparts. But this has only been achieved because, after a period of voluntary compliance that yielded few results, the government introduced tough sanctions for companies that failed to implement the quota.
That is the conclusion of a study published earlier this week in Berlin by the Friedrich Ebert Stiftung, a research foundation with links to Germany’s Social Democratic Party (SPD). Authors Aagoth Storvik and Mari Teigen, both senior researchers at the Institute for Social Research in Oslo, argue that without both the compulsory quotas and the accompanying sanctions for non-compliance, it would be next to impossible to increase the number of female board members.
The ‘Norwegian Paradox’
Storvik told SPIEGEL ONLINE that there was something of a “Norwegian paradox” at play in her country, which is often regarded as one of the best places in the world to be a woman. She explains that while there had long been many women in politics and a moderate number of female managers in the public sector, when it came to the private sector, “we were rather low down the list in Europe.” The fact that board members are usually drawn from top managers lead to a low percentage of women on the company boards, with only 6 percent in 2002. “So we didn’t have the best point of departure when the reform was introduced.”
When politicians proposed the measure in Norway, it sparked a massive public debate — with opponents saying that such positive discrimination would be unfair to men and that private companies should be given the freedom to appoint whichever candidates they preferred to their boards. Another common argument held that more competent men would be replaced with less skilled or qualified women.
Yet since the law was introduced there have been no complaints from employers associations, nor have CEOs stated that they have had problems finding suitable candidates for the board. “It is surprising because when the quota was introduced it created a lot of debate, especially from people in the business sector, who were critical of the reform,” Storvik says. “But after the reform went into force almost nobody seemed to object, hardly anybody is writing about it in the newspapers any more or telling us about negative experiences.”
The fact that a broad spectrum of political parties, including the conservatives, supported the measure helped lay the groundwork for broad public acceptance. But it also helped that Norwegians are already used to the idea of quotas in areas like politics.
So has the quota legislation had a trickle-down effect that goes beyond the board rooms and into the wider economy? “There is an increase in women in other management positions both in the firms which were targeted by the reform, but also in other firms that were not,” says Storvik. “But it is impossible to say if this has been caused by the reform.” The law only affects the major companies listed on the Oslo Stock Exchange and is not extended to private small- and medium-sized firms.
Some also feared that companies would be forced to appoint sub-standard members to their boards, but that hasn’t happened either, Storvik and Teigen found. In fact, their study revealed that 36 percent of female board members had a university education lasting six years or more, compared to just 22 percent of their male counterparts. And it is also not the case that a few women are hoarding many positions across numerous company boards. The report found, in fact, that male board members typically had more memberships than their female colleagues.
The authors also argue that, left to their own devices, companies will do little diiversify the gender composition of their boards. When the law in Norway was first implemented it stated that the sanctions would not come into effect if companies raised the number of female board members to the demanded level. This did not happen. By 2006, the percentage had only increased to 18 percent.
After a grace period, tough sanctions went into force for non-compliance — the most drastic of which was the dissolution of the company. Businesses got the message and soon began appointing women as board members. By 2009, the 40 percent target had been achieved.
The fact that the increases in companies were only modest when they were given the chance to do so voluntarily, says Storvik, would imply “that it was very important that the law was made mandatory.”