“IT’S LIKE smoking; ultimately only a hard intervention made people change,” says Jochem Overbosch, an executive recruiter in Amsterdam. As with bans on lighting up indoors, he says, so too with mandatory quotas for women on company boards, which the Dutch Parliament voted for this month after softer targets failed to move the needle much. Employers say they approve. Assuming all goes to plan, the Netherlands will join seven European countries (and California) in replacing the carrot of “please” with the stick of “or else” to increase gender diversity.
Will it make a difference? Quotas with consequences for firms—such as fines in Italy or delisting in Norway—have increased women’s boardroom presence. Firms with more women seem to work better, with higher attendance and tougher monitoring of management. But no discernible impact on company performance has been identified. And the hoped-for trickle-down effect—whereby more female board members would swell the ranks of female executives—has yet to materialise.
Still, quotas are here to stay. No country has lifted those put in place so far (though the Dutch insist theirs are temporary). Best practice is a work in progress, but some dos and don’ts are becoming clear. Formalising selection processes to avoid a shortlist of chairman’s chums, for example by hiring an external search firm, as most British firms but only two-fifths of those in America do, is a good idea; it helps avoid inadvertent double standards. So is broadening selection criteria away from a multitude of narrow ones, such as years of executive experience or industry expertise. Ensuring that more than one woman makes it onto the shortlist also helps; research has shown that a lonely shortlisted woman (or representative of a minority) has little chance of getting the job.
Firms should avoid seeking a “pink unicorn” who ticks all conceivable boxes, recommends Laura Sanderson of Russell Reynolds, an executive-search firm. Spreading the desired skills over a number of future appointments makes it easier to find female candidates with at least some of them (or male ones, for that matter). Short, fixed terms for board members make renewal easier. This helps explain why in Britain, which has espoused them, boards are 30% female whereas in America, which has not, progress has flagged, despite corporate professions of gender equality.
Critics say boards are the wrong thing to focus on—a symptom of workplace gender inequality, not its cause. A study just published by Zoë Cullen of Harvard and Ricardo Perez-Truglia of the University of California, Los Angeles, highlights this. The authors studied promotion at a large Asian bank and found that men with male superiors rose up the hierarchy faster than those with female ones. Women managers do not appear to be similarly partial to female underlings, which may help explain why female board quotas have no effect on management’s gender mix.
The Dutch quota requires 30% of seats at large listed firms to be occupied by women. This translates to an extra 66 female board members, on top of the 122 who occupy such positions already, estimates Mijntje Lückerath from Tilburg University. Annet Aris, herself a member of several boards, admits the new law is “a lot of noise for a small group of women”. But, she adds, it is “still a very important signal”.
And signals matter, not least to ESG investors, who care about firms’ environmental, social and governance performance as well as their bottom-line. Helpfully, gender diversity on boards is easier to pin down than most ESG metrics. It is becoming ever harder to skirt.■