EU Justice Commissioner Viviane Reding is often quoted as having said, “I don’t like quotas, but I like what they do.”
Across Europe, the prospect of introducing board quotas has produced heated debate. Following Norway’s 2004 law requiring the boards of publicly traded companies to be 40 percent women, several other countries — France, Spain, Belgium, the Netherlands, and others — have introduced similar measures, although Norway’s laws remain the strictest. When I met Arni Hole, Director General of Norway’s Royal Ministry of Children, Equality, and Social Inclusion and the architect of the quota law, a few years ago, she insisted that Norway’s program is the most comprehensive in that it is binding. A company that doesn’t comply is delisted.
At the same time, some countries have resisted implementing any flavor of quotas — the UK for example. It’s also difficult to imagine any kind of boardroom gender quota legislation taking place in the United States. Quota detractors say that affirmative action forces companies to hire less qualified candidates. Proponents say that quotas ensure qualified applicants who might normally be ignored don’t get overlooked.
In fact, Stanford University research suggests that gender quotas may actually boost the percentage of high performing women willing to apply for a position. The result is that there’s no marked decrease in quality in the person who gets hired. That is — when companies signal that they want to hire more women, more high performing women apply for jobs, and more high performing women get jobs — without companies decreasing their performance expectations.
The paper, which will be published in the journal Management Science, shows that gender quotas can ensure that an equitable percentage of high performing women enter the applicant pool for a certain position. But more interestingly, the research also shows that the quality of the female applicants’ performance doesn’t decrease.
While many have surmised that affirmative action means that companies will have to decrease the quality of their hires in order to attract more diverse candidates, this research indicates that this simply isn’t true. This effect is offset, because qualified women become more willing to compete for these positions when they learn that quotas are being instituted.
The researchers, Muriel Niederle, Stanford University and NBER; Carmit Segal, University of Zurich; and Lise Vesterlund, University of Pittsburgh and NBER, designed a series of tests (based on math problems), in which people could choose to be paid a small amount for each right answer they came up with, or they could decide to enter tournament pay, in which they would receive a substantially higher payment per correct answer, but only if they won the tournament. If they lost the tournament, they got nothing.
Men were much more likely to enter the tournament, while women were much more likely to take the initial lower offer of being paid for each correct answer without having to compete. The researchers then notified participants of new tournament rules: for every male winner, there would have to be a female winner.
The change was dramatic. “We find that affirmative action changes tournament entry substantially. The entry of women increases, that of men decreases, and the response exceeds that predicted by changes in the probability of winning,” the authors write. Before the affirmative action tournament, women who could have won weren’t playing. The institution of the quota increased the participation of high performing women
The research suggests that gender quotas can be implemented in different countries – or at individual companies – without experiencing a decrease in applicant quality. The authors explain, “Our results suggest that when high performing women fail to enter competitions they can win, then affirmative action can have a larger than expected effect on applications and this response can reduce, if not eliminate, the anticipated cost of achieving a more diverse set of winners.”
There is one caveat, they say. It is important to publicize the quota. Maintaining the quality of applicants hinges on more high performing women entering competition, and – in this study – they don’t do that unless they know affirmative action is taking place.
“In fact the performance requirements for men and women are essentially the same under affirmative action and there is limited or no reverse discrimination. This difference in ex ante and ex post costs of implementing an affirmative action quota implies that applying such a policy secretly or without allowing for adjustment in behavior may be particularly expensive, as the response to the policy helps adjust for existing inefficiencies.”
The research suggests that in order to make sure that a greater proportion of high performing women apply for competitive jobs, companies need to loudly and frequently proclaim their desire to increase the percentage of women they employ, as well as discuss the programs they have instituted to support them.