Corporate affirmative action for women?

[wiggin]

I've been following this story with interest for a while, and I'm curious what you guys think. Basically, there's a movement in Europe to legally require that X percentage of high ranking people in a company (normally board members) be women. Surprisingly to me, it seems to have quite a bit of popular support, though obviously businesses are less keen. Frankly, I'm utterly baffled by this move - IMO, corporate board positions should be decided on the basis of merit and nothing else. Getting to that kind of position takes a lot of effort and a long, complex career - how can we just arbitrarily decide that 40% of them must be women?

More generally, I have concerns about how it even makes sense. Women have long been underrepresented in high ranking corporate positions, and I don't doubt that some of this is due to a glass ceiling. Yet a lot of it is more complex - even in countries where women do form nearly half of the workforce (much of Europe does fit this category), their workforce participation is skewed towards a lot of service professions (healthcare, education, etc.) and less to corporate positions. Furthermore, fewer women may get the requisite management degrees (and the necessary career ambition) to move up the corporate ladder. Lastly, and IMO most importantly, women's careers are often slowed down quite a bit by competing priorities - raising a family being the most obvious one. This isn't helped by these same European countries encouraging women to take long paid maternity leaves, which may atrophy their skills and damage their career prospects.

None of the above factors has anything to do with discrimination, but they would all lead to lower percentages of women in high ranking corporate positions. Why force companies to recruit less talented people for their board positions in the name of some silly sense of 'equality'? Most large companies in the Western world today have diversity programs or whatever to actively recruit the underrepresented, including women. Why tamper with their career advancement process? I know that the workplace was a very different place even a few decades ago, and women continue to face workplace challenges different from their male counterparts. Yet by and large Western society has raised in the current generation of new workers a fairly egalitarian approach towards gender issues. Letting this culture percolate through the corporate heirarchy is probably far more effective towards the elimination of discrimination than any quota system.

What do you think?

Waving a big stick

“I DON’T like quotas, but I like what quotas do,” says Viviane Reding, the European Union’s justice commissioner. A year ago she invited publicly listed firms to sign a pledge to increase the proportion of women on their boards to 30% by 2015 and 40% by 2020. If there was no significant progress within a year, she said at the time, “you can count on my regulatory creativity.” So far only 24 firms have signed.

So on March 5th Ms Reding (pictured) announced the launch of a three-month public consultation to ask what kind of measures the EU should take to get more women into boardrooms. The commission will then decide on further action later this year. There is no mention of quotas yet, but the consultation document seems to be paving the road to them. Among other things, it asks: “Which objectives (eg, 20%, 30%, 40%, 60%) should be defined for the share of the underrepresented sex?”

Only 13.7% of board members of large firms in the EU are women, up from 8.5% in 2003. Female presidents and chairwomen are even rarer: just 3.2% of the total now, compared with 1.6% in 2003. Women account for 60% of new graduates in the EU, and enter many occupations in roughly equal numbers with men. But with every step up the ladder more of them drop out, and near the top they almost disappear.

Plenty of research suggests that companies with lots of women in senior positions are more successful than those without (even if there is no proof of a causal relationship). So it seems to make sense to get more women on boards. But how?

Norway, which is not a member of the EU, introduced a quota for women on boards a decade ago, which catapulted their share from 9% in 2003 to the required 40% now. Several EU countries have recently followed suit. France brought in legislation just over a year ago under which listed and large unlisted companies must reserve at least 20% of board seats for members of each sex by 2014 and 40% by 2017. This has boosted the number of women on French boards from 12% to 22%. Italy and Belgium have mandated a minimum one-third representation. Spain and the Netherlands have introduced new laws, but without stiff penalties. Germany is debating quotas. Some European countries regulate the sex balance on the boards of state-owned companies. Rules vary, but opinion seems to be converging on a near-term target of 25-30% and a longer-term one of 40%.

Europe’s population at large seems to be all for it. A special Eurobarometer poll commissioned by Ms Reding’s directorate-general, published this week, found that three-quarters were in favour of laws to ensure sex balance on boards. More than four respondents out of ten thought that a 50% share for women would be realistic.

Business generally opposes quotas, fearing that they will encourage tokenism and make it harder to appoint the best people. Critics of the Norwegian scheme suggest that it has put less experienced women on boards who may not be up to the job, and that some of the more obviously suitable ones tend to hold numerous directorships, defeating the aim of widening the circle of top women. In Britain an official report about women on boards, published a year ago, came out against quotas and in favour of voluntary commitments by companies. A growing number of companies in the EU are setting their own targets.

If Ms Reding were to decide later this year that stronger medicine is needed, what might she do? Fraser Younson of Berwin Leighton Paisner, an international law firm, thinks that she might start by asking individual member countries to commit themselves to robust voluntary targets over a set period, say two or three years. If those fail to produce results, she might then introduce a binding directive. That would require the agreement of the Council of Ministers and the support of the European Parliament. But her hope may well be that the threat of quotas would make voluntary targets seem less onerous.

Some experts think that the whole debate about the composition of boards is something of a distraction from the main problem: that so few women reach the upper echelons of management from which board members are typically drawn. McKinsey, a consultancy which has been making the business case for more women in senior management jobs for some years, has just come out with a new study of 235 large European companies which shows that most of them take the issue seriously.

Some 90% have at least one diversity programme in place; often lots of them. Yet many of these programmes are poorly implemented. Even if the boss is enthusiastic, senior and especially middle managers are often less keen. To get the pipeline of female internal talent to fill up, what is needed is a change in mindsets at every level in the workforce. That could take time. But McKinsey’s Emily Lawson says she feels a “sense of inevitability” that women in senior management are coming into their own. And once a larger number of “boardable” women starts to fill the pipeline, a 30% or 40% share of board seats may no longer look fanciful.

http://www.economist.com/node/21549953