Gender Diversity on the Board: The US Falls Further Behind (And Why We Need Shareholder Access) (Part 3)
The problem of inadequate gender representation is not limited to the United States. It is effectively a global issue.
Recognizing the failure of the market in this area, some countries have adopted a legislative solution. Norway was the first to do so. The government required companies to have at least 40% representation on boards of both genders. Effectively this requires an increase in the number of women. Norway did not do so not to improve corporate efficiency but to promote equal treatment.
Norway currently has the highest percentage of women on corporate boards. Moreover, early reports suggest that the requirement while improving diversity has not caused harm to the business activities of Norwegian companies.
Other countries have followed suit. At the recent British study notes, the list of countries signing on to the Norwegian approach is growing. They include:
- Spain – which "passed a gender equality law in 2007 obliging public companies and IBEX 35-quoted firms with more than 250 employees to attain a minimum 40% share of each sex on their boards within eight years (2015). Companies reaching this quota will be given priority status in the allocation of government contracts. There are no formal sanctions. Women made up 6.2% of boards in 2006. This proportion has risen to 11.2% in early 2011."
- Iceland – which "passed a quota law in 2010 (40% from each sex by 2013) applicable to publicly owned and publicly limited companies with more than 50 employees."
- France – wich "has passed a bill applying a 40% quota for female directors by 2016. The quotas are for 20% within three years and 40% within six years for listed companies and 40% within nine years for non-listed companies. The sanctions for non-compliance are that nominations would be void and fees suspended for all board members."
- Netherlands – "proposals were made to apply a 30% quota for men and women for larger companies. Companies would have to explain any non-compliance. This requirement would expire in January 2016."
- Canada – "Quebec has legislated gender parity for the boards of its Crown corporations and is on track to have 50% female representation by December 2011."
Moreover, the approach is likely to receive serious consideration in other countries.
One could make the argument that this approach is occurring in countries that are less deferential to the markets and therefore more willing to have the government intervene. In the US, however, greater deference to the markets would preclude this type of approach. Aside from any issue as to constitutionality, quotes imposed on those in the board room would be viewed as unconscionable interference by the government into the market.
Yet other countries with comparable deference to the markets has opted for a larger government role in promoting diversity. A government sponsored study in Great Britain examined the issue of gender diversity and specifically rejected the approach of the non-deferential group. Nonetheless, it suggests a series of affirmative reforms designed to raise the number of women on the board. It goes beyond anything taking place in the United States.
We will look at the report and the recommendations in the next post.