In Business, Gender Quotas Aren't the Way to Go

ByMic Writer

In 2003, the Norwegian government passed legislation requiring that women occupy 40 percent of board directorship positions in both large private firms and public enterprises by 2006.   

The gender quota legislation was introduced as an attempt to encourage diversity and equality in Norwegian corporations where women accounted for less than 7% of board membership. Eight years later Spain, France, and the Netherlands have all followed a similar path, calling for legislation that will introduce gender quotas to corporate boards. Six months after British Trade Minister Lord Davies launched his report proposing that businesses voluntarily set their own targets to up the number of women on boards to 25% by 2015, only 33 members of the FTSE 100 have managed to comply with Davies’ proposition. 

The British government, however, has threatened to impose a quota should companies fail to meet the suggested target. As an affirmative-guided effort, quotas will not end gender inequality in corporate boards but would propagate a gender-oriented approach that is guaranteed to prove a backlash on women and possibly undermine company performance in the process. 

The pros and cons of imposing a quota system as a mechanism to fight inequality have become so redundant that the rationale behind initiating such a move is guaranteed to receive praises and criticisms. 

As a precedent, the Norwegian experience with the gender quota law has yielded more negatives that positives. A study by the University of Michigan found that the gender quota law has failed both in “improving the professional caliber of boards and in enhancing corporate performance.” The study also pinpointed that Norwegian companies were forced to increase the share of women on their boards by more than 10 percentage points and this led to a 20% loss the year after adopting the quotas. 

Former Secretary of State Condoleezza Rice emphasized in her recent PolicyMic op-ed that America or states in general are not NGOs, rather they are strategically interests-oriented. The same goes for corporations whose clear-cut agenda is to accumulate profits. Therefore, egalitarian mechanisms designed for the workplace have to complement this ultimate goal and not stand against it.

As a woman, I am opposed to the idea of imposing quotas at the job place because it would not encourage appointments on a merit basis, but instead on a basis of special preferential treatment. The introduction of a quota system would only reduce the presence of women on boards to a forced imposition as opposed to an earned spot. In addition, making the gender quota an imperative will require companies to tap into labor markets where demand may outweigh supply. There is no doubt that there are women qualified for these upper-echelon positions, however, the question becomes how large is this labor pool and would companies have to recruit women with less experience just to meet quotas. If companies have to resort to the latter, this would not only support discrimination against qualified men but also hinder businesses in the process.  

There is a normative rationalization that greater diversity in the upper echelons results in well-rounded decision making and hence, better returns. This idea has been reinforced by a survey of 89 European companies with very high proportion of women in senior manager posts where results showed that these companies enjoyed a higher return on equity. 

While this success could be used to argue for quotas, it brings up the dilemma of causation versus correlation. However, a more feasible approach would be to introduce family-friendly options since childbearing and motherhood are one of the mainly identified factors that women address when undertaking certain jobs or pushing for promotions. Quotas on the other hand could potentially yield negative reactions, especially when forcefully imposed.

Photo Credit: mirimcfly