By Tina Vasquez (Los Angeles)
Finding a U.S.-based company willing to go on the record and discuss their efforts to recruit, hire, and advance women is an easy task – if the phrase “diversity effort” is used. Getting the same company to discuss “gender targets” is impossible; they have no such practice in place. Or so they say.
Gender targets – or gender quotas – have been getting a lot of buzz lately and it’s a topic that gets impassioned responses from women on both side of the fence. The idea of making it law that a specific number of women need to be hired still seems radical, even to more egalitarian societies such as Norway’s. Back in 2002 when the country’s trade and industry minister, Ansgar Gabrielsen, proposed a law that would require 40 percent of all company board members to be women, many Norwegians were staunchly opposed – and to their dismay, the measure was eventually approved. At the time, women held less than 7 percent of board seats and less than 5 percent held chief executive positions.
Before the measure was passed, the number of women on boards was growing by less than 1 percent a year for ten years, leading some to believe that it would have literally taken 200 years to have boards comprised of 40 percent women. Nearly eight years later, roughly 400 companies have a board comprised of 40 percent women and Norwegian women fill more than 25 percent of board seats in the country’s 65 largest privately held companies. Obviously these numbers are good for women, but is the business case for diversity holding true? Are women improving the companies they serve?
Looking Beyond Frustrating Findings
The University of Michigan quietly dropped a bombshell on Norway’s gender quota law when it released a study which found that the influx of women into Norway’s boardrooms has actually done very little to improve corporate performance or enhance the professional caliber of the country’s boards. Early evidence even suggests that the law has had a negative effect on corporations and despite increasing the number of women on boards by sixfold, there has been little increase in the number of women chief executives.
The University of Michigan study, which was published in September, used a market-based measure of corporate governance known as Tobin’s Q, which measures the ratio of a company’s market capitalization to the replacement cost of its assets. Michigan’s study found that Norwegian companies performed an average of 20 percent worse the year after adopting the quotas and that companies required to make the most drastic changes to their boards suffered the largest negative impact. The study also found that as the boards in Norway grew younger and more inexperienced, performance declined. According to the Center for Corporate Diversity, Norway’s law has caused other unforeseen consequences as well: Norway’s most sought-after businesswomen have taken on multiple boardroom roles; this elite group of 70 women currently hold more than 300 board seats.
These, of course, are just preliminary findings and it is often be argued that the law hasn’t been in place long enough to truly see the effect of the increased number of women. According to Amy Dittmar, co-author of the study and professor of finance at Michigan’s Ross School of Business, “It’s not that women are worse performers on boards, but rather that the supply of women candidates is not the same as the supply of men.” She continued, “It’s disappointing that that’s the case in this day and age, but it seems to show that the glass ceiling is still in place.”
Back in the United States…
Spain and the Netherlands have recently passed laws similar to Norway’s. Central Asia has numerous gender quotas. The French Senate will soon debate a bill that calls for a female quota by 2016. Belgium, Britain, Germany, and Sweden are also considering similar legislation. Even Canada’s getting in on the action. Our neighbors to the north are considering gender-based hiring quotas to increase the number of women in construction. So, where does this leave the U.S.? Chances are the United States will never pass legislation that calls for gender targets in the boardroom, in the workplace, or anywhere else. But that doesn’t mean that major U.S. companies don’t already have practices in place that basically require a specific number of women be accounted for.
Kellogg, for example, appears to have a quotas program it refers to as its “K Values.” According to the company, “having a diverse work force is the right thing to do and makes good business sense.” Walmart also does very little to hide its diversity efforts; the company even publishes a yearly Diversity and Inclusion Year of Accomplishments Report.
Frank Risalvato, a certified personnel consultant and recruiting officer, is apprehensive to name currently-operating companies with similar practices in place because of his business relationship with those companies, but he knows of several who are more than willing to pass up a more “qualified male candidate” for a female candidate in order to meet a specific target.
For example, he said, “Safeco Corporation no longer exists, but it was based in Seattle and under the leadership of its former CEO Mike McGavitt, the HR department would receive ‘directives’ about Safeco’s ‘diversity focus.’ When I worked for the company we had to prove that we were using diversity trafficked websites, outlets, and sources and we had to submit diversity candidates along with other ‘conventional’ candidates. I don’t feel as if there’s anything wrong with reaching out pro-actively to attract women and minorities; I think it’s a noble cause, but it does need to be monitored.”
Secrecy Around Gender Targets Makes Diversity Hiring Difficult
Thomasina Tafur, a former FedEx senior manager who now owns her own consulting firm, remembers how the company urged her and other employees to improve their “diversity efforts.”
“When I worked at FedEx in a variety of management roles we would receive computer-generated e-mails reminding us what our ‘diversity’ looked like for our team and were encouraged to make a ‘good faith effort’ to improve our numbers if they were low. We never knew what our exact numbers should be, but it was obvious that if you had 80 percent men or Caucasians, you needed to do a better job of recruiting diverse candidates.”
According to Tafur, it isn’t gender targets she finds alarming, but rather the secrecy behind them. This secrecy, she believes, runs the risk of cheapening a company’s sincere effort to diversity their workforce and recruit qualified, talented women.
“Any policies or actions performed in secrecy are what’s detrimental,” Tafur said. “Every company should be open about their diversity goals and processes; it should be openly expressed that a company encourages and seeks diversity and the company should make employees feel welcome to express their questions or concerns about these efforts. Anything done in secrecy allows people to construct their own assumptions and generally, the assumptions are not positive. Giving talented women the opportunity to step up into leadership roles is a great thing, but hiring a woman simply for her gender is destructive. She will always doubt herself and those around her will doubt her capability. It is critical for leaders to hire talent – no matter what it looks like.”
More transparency in diversity hiring would help allay these fears. What are companies waiting for?