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Monday, February 16, 2015

Strategic CSR - Diversity

The article in the url below presents an argument against the idea of quotas as a solution for the lack of diversity among the senior executives and directors of large firms. Across the board, the Scandinavian countries have done more than most to advance equal opportunities for women in business:
 
"The region has also led the world in introducing quotas for corporate boards. Norway started the trend, and now requires stockmarket-listed companies to allot at least 40% of board seats to women. Iceland, Finland and some other European countries have introduced similar requirements."
 
These quotas, however, only relate to director positions. The argument behind doing so was that, over time, greater numbers of female directors would create more opportunities for female employees to become managers, executives, and eventually CEOs. While that was the theory, however, there is evidence to suggest that: 1) progress has not been as rapid as anticipated, and 2) that even what progress there has been is misleading. First, is the idea that progress is little different from countries that have not adopted similar quotas:
 
"[The latest Global Gender Gap Index, compiled by the World Economic Forum] ranked Denmark 72nd in terms of the gender gap among senior managers and officials. There may be more women sitting round the table at board meetings, but the person who runs the show is almost always a man: only 6% of Norwegian listed firms had a female chief executive in 2013, little better than the 5% of American companies on the Fortune 500 list that have a woman as CEO."
 
Second, however, the article presents evidence that the progress that has been made is essentially inflated. The quotas only cover listed firms. As such, many of the firms that did not want to or could not comply took themselves out of compliance by becoming private:
 
"Certainly, the [quota] has transformed the boardrooms of Norway's listed companies: female directors have closed the pay gap with male ones, even as their numbers have surged. But look beyond those 'golden skirts' and the picture is more complex. Companies fled the stockmarket as quotas were phased in: Norway's stock of listed firms fell from 563 in 2003 to 179 in 2008. And even among those that remain on the stockmarket, Norway's 6% figure for female CEOs in 2013 is an improvement on the 2% in 2001, but no more of an increase than Denmark, which has no quotas, achieved over the same period."
 
Maybe the ripple effects of the quotas will take longer than expected, especially with the gender discrimination that is so embedded in much of society. Norway's ambitious quota of 40% was passed in 2006 and came into effect in 2008 (for more information on this, see this briefing from The Economist). Certainly, the evidence exposed by the academic research that is presented in the article, however, does not look promising:
 
"… in the first substantial study of the Norwegian reforms, … [there is 'no evidence' that the quotas have done anything] to improve the career prospects of highly qualified women below board level. They have not helped close the gender gap in the incomes of recent business-school graduates. Nor have they done anything to encourage younger women to go to business school in the first place."
 
Take care
David
 
David Chandler & Bill Werther
 
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A Nordic Mystery
November 15, 2014
The Economist
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