UK and Norway Show Why Quotas are Necessary for Achieving Gender Parity on Boards

By Melissa J. Anderson (New York City)

Depending on whom you ask, the UK’s recent foray into the issue of gender equality on boards has produced big results – or results that are not big enough.

According to the Guardian, in the past six months since the Lord Davies Report was released, FTSE 100 boards have appointed 18 women (or 31% of the total appointments since February 24). Eighteen women might not seem like a lot, but this is more than double the number of women appointed in years past. But is it enough?

Meanwhile, it seems that Norway isn’t satisfied with the results of its current gender quota law, which mandates that 40 percent of board seats at every publicly traded company be held by women. Boards have upheld the law since 2008, when it went into full effect.

Now the progressive Nordic country is eying private companies’ boards as well. It seems that without compulsory quotas, firms by and large don’t elect to promote large numbers of women on their own.

Disappointing Numbers

Norway is considering applying its 40% law to large AS (privately held) companies, and the law will most likely focus on companies with over 500 employees. According to the FT, Norway initially hoped that the original legislation on ASA (publicly traded) companies would influence businesses and encourage them to place more women on their boards.

But this hasn’t happened – or at least the effect hasn’t been strong enough. Currently, private company boards are made up of 17% women.

Interestingly, this is not much more than the 13.3% of total board appointments that went to women in the UK in 2010, before leadership gender became a large focus for top companies. And, according to Guardian writer Tom Bawden, “Even with the surge in female appointments, only about 14% of FTSE 100 board positions are held by women. That’s an improvement on 12.5% in December but short of Davies’s 25% target.”

Additionally, as Aamina Zafar pointed out in Financial Times Adviser:

“Women currently make up 30 per cent of new appointments in FTSE 100’s and high-profile companies. However, there has been much less change in the composition of FTSE 350 and Alternative Investment Market companies, with little evidence to suggest that this trend is changing.”

Similar to the Norway case, encouraging more gender parity in one area of business didn’t have much of an impact on another.

Optional Targets are Not Effective

The Norway and UK numbers seem to show that encouraging companies to hire more female directors does have some effect – but not nearly as much as is needed.

Initially, Norway was aiming for about half of the country’s board seats to go to women – and settled on 40% to provide a little wiggle room. Most of Norway’s public boards are made up of 5 people – so the framers had at least a 2/5 ratio in mind.

We aren’t seeing that on the boards that aren’t subject to the legislation. As Rikke Lind, secretary of trade and industry told the FT, “It’s not going fast enough… During 2012 we must be finished and prepared from the government [side], I hope.”

Meanwhile the UK has another few years to meet the 25% goal set by the Lord Davies report. But, as Anna Sofat, director of Addidi Wealth, pointed out to the FT’s Zafar, change is happening too slowly to meet the goal on time.

She said:

“There is progress but it is slow.

“I would be in favour of a progress report next year and, if we have not hit at least 15 per cent representation, then I would favour a quota system.

“Quotas will fast-track more women and bring about a change – it worked in Norway so I don’t see why it wouldn’t work here.”

Top level dedication to women on boards is important for bolstering public support for gender equality and raising the issue in society at large. But that’s only one part of a movement toward leadership gender parity. Without effective policy to match government calls for more women on boards, initiatives aimed at getting more women to the top will ultimately be seen as toothless.