Norway has the highest level of participation of women in the boardroom than any other country in the world, having introduced a 40 per cent quota in 2003. (The quota became mandatory in 2008.)
As my colleagues and I have reported in the past, the presence of women in the boardroom in most countries is scant. According to data compiled by Catalyst, the non-profit group that aims to expand opportunities for women in business, in the US, women hold 16 per cent of directorships at Fortune 500 companies; corporate boards in Germany, the UK, and France all hover around 12 per cent. In China, women hold 8.5 per cent of board seats; in India it’s 5.3 per cent; and in Japan, less than 1 per cent of directors are women.
Back to Norway for a moment. Is it the way forward?
To help answer this question, I spoke with Amy Dittmar, an associate professor of finance at University of Michigan’s Ross School of Business, who wrote a paper examining the effect of the Norwegian law on boards and firm value.
Her research found that on average, companies saw a 2.6 per cent drop in value when the new law was announced and, if they had no women on their board, they saw a 3.5 per cent drop in value. Companies saw still further declines in value over the year that they altered their boards to meet the terms of the law.
Dittmar says the drop in value was not necessarily because the firms put women on the board, but rather because they put less experienced directors there instead. The women directors were more likely to have been at the middle-management level, and as such did not have any direct experience at running a company.
“Our paper could be used to make the argument against quotas, especially quotas within a short window.”
Remember: companies that didn’t comply with the law were going to be dissolved.
“Quotas force companies to make decisions more quickly, and there are costs to a company. That cost has to be weighed against any benefits to society that might be gained in promoting women. At the same time, when you see a corporate board diversity stagnating in the high teens, I understand why there may be a need [for them].”