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Quotas on Boards Don’t Deliver for Women in Business

January 4, 2019 in Economics

By Ryan Bourne

Ryan Bourne

Progressives regularly denounce “trickle-down
economics” when it comes to cutting taxes. Yet many have
their own theory for economic outcomes cascading from the top. The
idea that government mandates for minimum female representation on
company boards would filter down to better opportunities for other
women in business has been an article of faith for nearly a
decade.

During that time, countries such as Norway, Belgium, France and
Italy have set explicit quotas for women on boards, backed up by the
threat of company dissolution, fines, bans or other sanctions for
failure to comply.

Germany and the Netherlands have introduced softer laws without
binding punishments. In the UK, the 2011 Davies review set
ambitions for a voluntary business-led approach with the guideline
of aiming for 25pc representation for women on
FTSE 100 boards by 2015 – a target that was met. But many lament
that trend not accelerating quickly enough for their liking,
calling for an EU-wide target of 40pc female board members.

The key justification for such an action has always been the
purported wider benefits to women in business. The
under-representation of women at board level was thought to
discourage networks conducive to nurturing female talent, and lead
to less influence over human-resource policies that would otherwise
be more female-friendly on company policies for childcare and
work-life balance.

Mandated quotas for females on boards, it was hoped, would
change that. They would have the added benefit of encouraging the
promotion of women further down the line, training them for
leadership and potentially future board roles. The happy result?
Supposedly, the reduction of pay and other gender-related
opportunity gaps. Well, at least, that was the theory.

But increasingly evidence shows that while mandated quotas
unsurprisingly boost female board participation, the broader
benefits are difficult to ascertain. The argument that quotas
improve opportunities for all women amounts to motivated
reasoning.

In 2003, for example, Norway passed a law mandating 40pc
representation of both genders on the boards of publicly limited
companies. The stated aims of the move were to improve female
representation in top company positions and to reduce gender pay
gaps.

To start with, the law encouraged companies to delist. A new
paper by economists Marianne Bertrand, Sandra E Black, Sissel
Jensen and Adriana Lleras-Muney finds that of 536 companies that
were public in 2003, only 179 remained so by 2008. Companies with
lower proportions of women on the board initially were more likely
to change their corporate structure to avoid the legislation.

Within those that did remain public companies, there was
(unsurprisingly) a convergence to the 40pc threshold. What is more,
companies appeared to be able to find women “well
qualified” according to most …read more

Source: OP-EDS

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