Gender equality in executive boardrooms has become an area of great importance for multinational companies throughout the world. Diversifying the board of directors, particularly the position of CEO and CFO, is considered vital to the economic stability of all sectors of industry in all regions of the world. Achieving such diversity requires serious and targeted efforts from both political and corporate factions. It is also an increasingly important public image issue.
Today, only 23 women hold CEO positions at companies that rank in the 2013 Fortune 500 list, a mere 4.6%, from companies that include GM, HP and IBM.1
Gender diversity in the boardroom is important for many reasons. Qualified and highly skilled female workers are an integral part of the modern workforce and the opportunity for them to rise to high-level positions is critical to a globalized world. As more and more women enter the workplace with business, economics, law and engineering degrees, the competition for executive positions with their male colleagues is only going to increase. As such, it is imperative that companies make a valiant effort to appoint candidates for executive positions in order to accurately reflect the diversity of their employees.Roblox Free Unlimited Robux and Tix
A Brief Overview
The Nordic countries, Norway, Sweden and Finland lead the world in terms of the number of board seats held by women; 40.9%, 27% and 26.8% respectively.2 Europe dominates the top 10 countries on this list, with the exception of South Africa at number 7 where 17.1% of board seats are held by women, the United States which ranks 9th with 16.9% and Israel at number 10 with 15%.2
At the other end of the spectrum, Middle-Eastern countries – Saudi Arabia (0.1%), Qatar (0.3%) and the United Arab Emirates (1.2%) – account for three out of four spots with the fewest female board members; Japan is also in the bottom four with only 1.1% of board seats held by women.2 Latin America and South America were positioned in the middle; Brazil was ranked 26th at 7.7% followed by Mexico (31st) at 5.8% and then Chile (36th) at 2.8%.2
Culturally and politically, European countries are generally more progressive compared to most countries, while in the United States social and economic policies tend to be more mainstream, i.e. somewhere in the middle between conservative and liberal values, while the Middle-East as well as Latin and South America are typically regarded as more conservative. These cultural distinctions play an integral role in defining the opportunity and accessibility that women have in the workforce and specifically in executive positions.
In order to meet these challenges, there are several initiatives underway to increase the number of women in the boardroom. The European Union has been engaged in legislative efforts which would mandate 40%-female quotas on non-executive board member positions in companies listed on stock exchanges throughout the EU and accompanying penalties for non-compliance. This model is inspired by quota-laws currently in place in Belgium (the law of 28 July 2011), France (the law of 27 January 2011) and Italy (Law 120/2011).
The Netherlands (law of 31 May 2011) and Spain (2007 Act on the Effective Equality between Men and Women) have also established “soft” quota-laws in which companies are obligated to comply with diversity requirements, but without the threat of sanctions; 30% in NL and 40% in Spain.
The United Kingdom has tried a different approach, one of voluntary diversification, with a goal of 25% female board member representation by 2015.3 Germany is currently considering implementing a 30%-female quota on supervisory boards for German stock exchange listed companies beginning in 2016.4
Despite the fact that quotas are in place in many countries throughout Europe, they are nevertheless highly disputed in the region and remain unpopular in some areas.
Mandatory quota laws face a much more daunting challenge in the United States, where courts are likely to strike down government-directed quotas or affirmative action plans as unconstitutional infringements on equal protection and a violation of the Civil-Rights Act.4 As a result, government and businesses alike will have no official role in dictating the inclusion of women in high-level executive positions.
Mandatory quotas also remain controversial in the South Pacific, where voluntary self-regulation is the preferred choice. Australia has already experimented with the use of “soft” self-regulation to increase diversity in the boardroom and is this approach is currently under consideration in New Zealand. A spokesperson from the Institute of Directors – a 6,000 member professional body for boards and board members in New Zealand – said quotas were “a last resort” measure.5 The spokesperson went on to say that, “companies should develop their own diversity policies and report to shareholders on progress against them.”5 It is worth noting that in Australia 12.3% of board seats were held by women, while in New Zealand that number was only 7.5%.1
Pros and Cons
There is of course the bottom-line argument that women in executive positions are good for business. A McKinsey & Company study revealed that “companies with the most gender-diverse management teams had 17 percentage-point higher stock price growth between 2005 and 2007 compared to the industry average and their average operating profit was almost double the industry average between 2003 and 2005.”3
In another study, “Catalyst research found that companies with more women on their boards were found to outperform their rivals with a 42% higher return in sales, 66% higher return on invested capital and 53% higher return on equity.”3
However, there are some that dispute the logic and effectiveness of boardroom quotas. A 2010 University of Michigan study conducted by Amy Dittmar and Kenneth Ahern of the Ross Business School, discovered that in one particular case in Norway, a 10% increase in female board members resulted in significant financial decline in the value of the company.6
The most common counterargument to the quota system is rooted in the spirit of free market capitalism; i.e. rewarding employees based on talent, perseverance, and the ability to succeed on their own without the support of outside parties.
At the end of the day, in order to increase female participation and leadership in the boardroom a coalition must be formed between governments worldwide and the business community. Additionally, it is equally necessary that cultural perspectives adapt to the changing face of a modern workforce. Combined, these efforts will lead to a more productive, efficient, and successful work environment for companies in general and for and men and women alike.
1 “Women CEOs of the Fortune 1000” by Catalyst, 2014
2 “Women on Boards” by Catalyst, 2014
3 “Women in economic decision-making in the EU: Progress report – A Europe 2020 initiative” by the European Commission, 2012
4 “Want More Women in Boardrooms? Easy: Make It the Law” by Heather Horn, 2013
5 “NZX ‘has duty’ to impose gender quotas in NZ boardrooms” by Cecile Meier, 2014
6 “Boardroom quotas: an incredibly bad idea” by Megan Moore, 2012
Image credit: Public domain, from Wikimedia Commons.
Author: Stephan Swinkels