Improving Women on Boards: Voluntary measures or quotas?

Women is the under-represented gender on boards of directors, but are voluntary measures or quotas the best instrument to close the gap? From one perspective of equity, quotas can directly strengthen female representation on boards, but also deliver broader organizational impacts, including a trickledown effect, given leaders tend to hire candidates that look like themselves. However, from another equity point of view, quotas may crowd out other minority groups, as gender is not the only dimension in diversity.  

Across the world, companies are encouraged to disclose gender diversity policies and set targets, without compromising merit-based appointments. This is commonly introduced through cooperate governance codes or legislation, as it has e.g., in Australia, Denmark, Finland, New Zealand, South Africa, and the United Kingdom.  

In 2015, the Australian Institute of Company Directors (AICD) called for the 200 largest listed companies in Australian Securities Exchange (ASX) to have 30 % of female representation on boards by the end of 2018. Companies made quarterly reporting, build awareness, and had collaborations with supporters, which resulted in an increase from 19,4 % in 2015 to 30 % in December 2019 of female board members in ASX 200 companies (31,8 % for ASX 100).  

Australia is moving towards a 40:40:20 balance, meaning 40 % of both women and men, with the remaining 20 % being of any gender to ensure practical terms for boards with uneven numbers and the natural turnover of directors. 

Since 2013, the largest companies in Denmark have been required to have targets and policies (but no quotas) for the gender compositions of the highest governing body. As of 2019, 2.173 Danish companies were included by the scope, and 50 % did not have one woman on their board. The Danish Business Authority (Erhvervsstyrelsen) reported, that in 2012 listed companies had 9,6 % (chosen by the General Assembly) and 16,3 % (chosen by the General Assembly and employees) female board members. In 2020 the numbers had increased to respectively 20,6 and 23,9 %

In May 2021, Confederation of Danish Industry (DI) invited all Danish companies to support gender diversity both on boards and in management by signing The Gender Diversity Pledge. As this incitive shows, voluntary measures also come from within the industry and business themselves and are not only formed by regulators.  

In 2003, Norway adopted a gender quota 40 % female board representation in public listed and state-owned companies, making it the first country to regulate the composition of boards. Since then, quotas have been introduced in European countries, including Belgium, France, Germany, Iceland, Italy, the Netherlands Norway, Spain, and Sweden, as well as other parts of the world, such as Israel and India. Subnational jurisdictions have also been implemented in the Province of Quebec in Canada and in the State of California in the US.  

Although, several countries have introduced quotas and many of them with similar measures, they vary in relation to scope, targets, implementation time and sanctions (and if yes, how significant). None of the legislations are harmonized, and the EU Directive on Gender Balance on Boards has been blocked by the European Council since 2012. 

In 2011, the French Gender Quota Law was passed, requiring all listed and non-listed companies with revenues or total assets of over EUR 50 million or employing over 500 persons for three consecutive years to have at least 40 % female board members by 2017, with a first step of 20 % by 2014. In 2018, the largest listed French companies had on average 44 % women on boards (10 % in 2010). 

Quotas might be the most efficient instrument to equalize men and women on boards, but is it also the one, that achieves most equality? 

In Norway, research shows that quotas were met with a mixture of more female board member as well as a reduction of seats. Studies also suggests a link between a company being delisted and a small share of female board members. Research also suggests a Golden Skirt Doctrine, indicating it is a certain type of women, who gets the seats. From 2013 to 2017, the number of Italian female board members increased by 80 % while the number of individual women on boards increased by 51 %, meaning that some women occupied more than one seat.  

Altogether, there are arguments both against and for the two ways of improving the under-represented gender on boards. The numbers shows that quotas achieve the targets faster than voluntary measures, but research also suggests that some companies meet the requirement of quotas in another way than intended.