Bursting the Bubble

Are gender quotas good or bad?

30 May 2013 | by

True: It is important to get more women into top corporate positions.

The question is whether this should be done by obliging companies to fulfil quotas. Are quotas good or bad?

Across Europe, women are strongly under-represented on corporate boards. European Commission statistics show that in January 2012, women occupied on average just 13.7 % of board seats for the largest publicly listed companies in EU Member States. In November 2012, the Commission proposed a Directive aimed at the under-represented sex attaining 40% of non-executive board-member positions in publicly listed companies, with the exception of small and medium enterprises. Some European countries have already established gender quotas; for example Norway, Spain, Iceland, and most recently France.

Supporters of establishing legal gender quotas often refer to the system in Norway as a successful example, where 40% of corporate board members are, by law, required to be women. But isn’t there a chance that the women, who get selected as a result of a quota, may be less qualified than their male counterparts? A study from the University of Michigan noted that this law in Norway has, “led to younger and less experienced boards and a decline in operating performance, consistent with less capable boards”.

In addition, how would such a law work in practice? Let’s say 10 people apply for a position in a company and three of them are women. What happens if the three best candidates are men, but with the gender quota in place one women must be employed? Is this fair to the male candidate who was better for the job, but did not get it because he was not a woman? And is it fair for the company?

To be qualified as a manager, it does not depend on one’s gender, but on education, competence and experience. Enforcing gender quotas would be like saying women can’t get the job on their own merits. We should all be selected on the basis of our qualities and capabilities. Therefore, I’m not sure if gender quotas are the correct way to obtain the goal of having more women on corporate boards. Perhaps, a more effective way to increase the number of women would be for Member States to share best practices. There are currently various national measures in place geared towards increasing the number of women on boards. For example in Germany, the DAX30 companies have demonstrated an increase in the share of women represented on boards. In the Netherlands, a law entered into force (the One Tier Board Act) which introduced that 30% of board members seats will have to be occupied by women. If a company fails to meet this target, it must clarify which measures will be taken to reach the target of 30% in the future.

I definitely agree that we need more women in high ranking jobs. But, this doesn’t necessarily mean that we need gender quotas. What we need to change first is the mind-set currently in place. For example, by providing better public childcare or increasing the parental leave for new fathers the perspective of people in society will slowly change. I believe this would be a better way to solve the problem, instead of the bureaucratic way that is proposed now.

The IMCO committee will vote on this Directive today, so expect further developments on this shortly.

For more information

–      http://www.debatingeurope.eu/2013/03/04/should-the-eu-implement-gender-quotas/

–      http://europa.eu/rapid/press-release_MEMO-13-430_en.htm

–      http://euobserver.com/justice/118749

–       http://ec.europa.eu/justice/newsroom/gender-equality/index_en.htm

4 Comments

  1. Emanuele

    Very hot topic and very interesting arguments… I do have, however, two general remarks:

    1) Aren’t the voluntary agreements you talk about in Germany and the Netherlands the same as gender quotas, just less binding? I mean they do not agree on increasing investment in childcare or similar, but they merely set an ideal percentage of women on boards. So isn’t the concept the exact same of a gender quota, just with less binding obligations for companies? I see there a bit of pro-corporate bias on your part.

    2) More in general, don’t you think this time you are being the idealist? I mean I completely agree with your idea and that’s exactly what I think as well, that in the perfect world we would not need this quota because we would select people based on competence, man or woman that is, and in the end eventually we would have a balance. However, this is not our world unfortunately. I mean, according to your reasoning, we should not have anti-racist laws because in the perfect world we would all be respectful of all people, independently of gender, race, sexual orientation, religion, etc. However, to remedy for the fact that our world is not perfect, we do have anti-racist laws, which just like gener quota are NECESSARY until we reach that point where society will be mature enough to implement this spontaneously without the need for the Commission to tell them

  2. For years the best qualified candidates were overlooked because they are women. Men with less qualifications have been promoted over women and appointed over women for year and we never head them asking, “Am I really the best person? Are you only hiring me because I am your friend? etc”. The law states that you can only hire qualified women. Company law and directors duty (as least in my country) make it impossible for directors to carry out their duties and appoint an “unqualified” person to a board position. Given women are graduating at an equal or higher rate then men and often with better grades there is no reason that the men of the word cannot find a couple of qualified women. It is not possible for all these women to lose their minds from graduation to senior levels. It just isn’t. And we know that more often is the case that women are MORE qualified than men when they get roles. So let’s just level out the playing field a bit and increase the talent pool of good candidates.

  3. Thank you for your comments.

    First of all, the Directive proposed by the Commission is definitely not the same as the self-regulation and voluntary measures of Member States. In particular, the consequences of not reaching the quotes are very different. Under the Directive, those missing the quota would be subject to administrative fines and the possibility of annulment of the appointment of non-executive directors. This is not the case in for example the Dutch law to increase the number of women on boards.

    We don’t live in a perfect world indeed. However, this does not mean that we should try to reach an objective on EU level without trying other options on Member States level first, for example, by giving more possibility to women through child-care policies etc. Here, it can be questioned whether gender quotas at European level are compatible with the rule of subsidiarity.

    I see there a bit of pro-European Commission bias on your part.

    It should be kept in mind that this is not just about increasing numbers. It is also about creating an environment where women are part of boards.

  4. Emanuele

    I am sorry, but I only see your answer as reinforcing my points rather than contradicting them.
    Voluntary measures, you say it yourself, means that the objective is the same, just the legal effect (i.e. sanctioning and legal remedies) is different. Which in the end means that 1) there is no obligation to have women in boards and 2 there is no obligation or incentive to adopt more long-term measures such as investments in education and child care. So easy life for companies who claim “well we tried, sorry it didn’t work” while (for some) not even trying, no guarantees for the female employees.
    As for the rest, I don’t say that the quota is the universal solution, of course it’s a solution that is short-termist. And of course it needs to be supplemented by long-term measures that ensure that, one day, that of women on boards will be a spontaneous process (investments in education, investments in child care, etc). But in the meantime this is a necessary measure to ensure that this process starts NOW.
    As a closure, I think that such a measure will also be, among other things, an incentive for companies to invest on their female employees because they know that, eventually, they will have to have a female representation on boards. Ok the measure is not sufficient by itself, but it’s a start, if you want to call it a “pro-Commission bias” please go right ahead, I call it a “I-want-to-live-in-a-fair-society-where-both-state-and-companies-do-their-part bias”

What do you think?