Take 5: Questioning Quotas

May 1, 2013To legislate, or not to legislate—that is the question.

On April 18th, 2013, the German parliament became the most recent EU government to reject legally mandated quotas for women on corporate boards. This follows a pushback led last year by Britain, the Netherlands, Sweden, and Denmark against a proposal by Viviane Reding, the senior justice official in the European Union, for legislation requiring that women occupy 40 percent of the seats on corporate boards in the EU. “I don’t like quotas,” said Reding, “but I like what they do.”

The proportion of women on boards across the globe remains low, and some countries have implemented quotas to tip the scales. Below are five facts about quota legislation across the globe:

1) At least seven countries have legislated gender quotas for publicly traded companies. They include Norway (mandating 40 percent women on boards), Spain (40 percent), France (40 percent), Iceland (40 percent), Belgium (33 percent), Italy (33 percent), and Israel, where publicly traded companies must have at least one women board director.

2) Israel was the first country to legislate gender quotas for publicly traded companies (1999)—Denmark is the most recent (2012). Unlike other countries, Denmark’s is a “flexi-quota”— companies set the target themselves and publicly disclose their policies to increase women board directors, and their progress against that target.

3) French women held only 7.2 percent of board director seats at publicly listed companies in 2004. The percentage of women on boards in France spiked ahead of quota legislation passed in 2010, and continued to rise following enactment of the law. According to GMI Ratings, in 2012 the percentage of female directors in France stood at 16.6 percent, nine out of ten French companies had at least one woman on their board, and nearly one-third of French firms have at least three female directors. “By all of three of these measures,” noted the report, “the level of female representation is now significantly higher on French boards than on those in the US, UK, Germany, or Australia.”

4) Norway has what some consider the boldest quota laws on the books. Publicly traded companies that cannot maintain at least 40 percent women board directors face dissolution by court order. Due in large part to quotas, women’s representation on boards in Norway increased in the last nine years from 9 percent in 2003 to more than 40 percent in 2012.

5) The UK has adopted a voluntary approach to increasing women’s representation, urging 25 percent representation of women in the boardrooms of FTSE 100 companies by 2015. From 2010 to 2012, women’s representation on FTSE 100 boards grew from 10.5 percent to 17.3 percent—on track to achieve the 2015 target. Despite this initial progress resulting from the UK’s voluntary approach, a recent Cranfield School of Management report found that in the second half of 2012, the number of women appointed to the boards of the 100 largest listed UK companies dropped sharply, from 44 percent to 26 percent. Though the majority of UK government officials still believe that a voluntary approach is best, some have threatened UK companies with tougher measures, including quotas, if they can’t meet gender diversity targets voluntarily. Currently a lighter touch prevails: companies that didn’t set women board director targets for 2013 or 2015 received a personal letter from Prime Minister David Cameron requesting that they do so!

At Catalyst, we see that quotas work. But we also believe that other approaches can, too. What’s most critical is that business leaders work to increase the representation of qualified women on their companies’ boards—not how they do it. 

What do you think is the best way for countries to improve women’s standing in corporate boardrooms? Please share your thoughts with us!

The views expressed herein are solely those of the guest blogger and do not necessarily reflect those of Catalyst. Catalyst does not endorse any political candidates. The post and the comments are presented only for the purpose of informing the public.