In 2003 Norway’s Parliament adopted a statute mandating that in Norwegian publicly held companies at least 40 percent of directors be of the gender opposite the other percentage of directors. The drafters phrased the law in observance of Norway’s long allegiance to gender blindness in all pursuits.
By 2008, Norwegian companies had achieved that goal, raising their percentage of women directors from 6 percent to 40 percent or more in six years.1 Meanwhile, Belgium, Spain, and the Netherlands adopted quota laws of one sort or another. Subsequently, France (40 percent) and Germany (30 percent) adopted quota laws calling for female directors on public corporations’ boards of directors.2 In 2012–2013, European Union (EU) Commission vice-president Viviane Reding pushed hard for the Commission to promulgate a quota law applicable to the then twenty-eight EU nations.3 She failed in that endeavor, but “vowed that she will not give up on the idea.”4
Quota laws and debate about them have been much-discussed topics for a decade or more, since Norway’s adoption, eliciting support in some quarters and adamant opposition in others, for example, the United Kingdom, the United States, and New Zealand.5 In the latest iteration of its corporate governance code (2015), the influential Organization for Economic Cooperation and Development (OECD) backed away from any firm endorsement of quota laws, despite urging to the contrary, providing only that “countries may wish to consider measures such as voluntary targets, disclosure requirements, boardroom quotas, and private initiatives that enhance gender diversity on boards and in senior management.”6
Nonetheless, advocates press onward. In 2015 Cambridge University Press published Challenging Boardroom Homogeneity, a 315-page paean to adoption of a quota law in Canada, authored by a law professor at Osgoode Hall School of Law (York University, Toronto, Ontario).7 Joining that chorus, and possibly hoping against hope, scholars in the United States have advocated quota laws in America.8 Other advocates have demonstrated that, empirically, quota legislation “generates the most substantial change to the representation of women on boards—far greater that any individual firm, industry or country-level factor previously identified.”9
Opponents have likened the enactment of quota laws in the United States to using an elephant gun to kill a mouse, or a mallet to kill a moth. On a more elevated plane, “many [U.S.] corporate leaders worry that preferential treatment [of women] will encourage tokenism, result in unqualified appointments, stigmatize beneficiaries, and diminish [women’s] credibility. [A] majority of American female directors oppose quotas,” citing similar purported reasons.10
Quota laws, of course, relate to female representation on corporations’ boards of directors rather than to representation in senior management. Nevertheless, the former would spill over into the latter. To ensure a robust supply of women directors, companies must place additional emphasis on the pool from which corporations and their boards are likely to select candidates for board positions (see chapter 17). A large segment of that pool is, of course, made up of women who inhabit the upper management ranks in publicly held U.S. enterprises. More slots for women as corporate directors would result in not insignificant pressure to increase women in senior management, that is, pressure to enlarge the pool.
How about the other side of the coin? Will the actuality of additional female directors aid in the elevation of additional women to the upper ranks of middle management and on into the ranks of senior management? “A study by economists in the United States and in Norway found that legislative mandates did not do much in the short run to increase women’s representation in the executive ranks.”11 In other words, although there is evidence that female CEOs bolster other women’s rise as executives (see the discussion of “trickle down” in chapter 2), the evidence suggests that females as directors have little or no such influence.
Of course, the first generation of activist efforts has concentrated on board seats for women candidates. Most individuals in business consider a seat on the board of directors of a major corporation to be the pinnacle of a career. Also, scholars and advocacy organizations can easily track diversity statistics on board composition for large companies. Annual proxy statements (“Definitive 14A’s”) that corporations file with the SEC contain extensive data on boards’ makeup. By contrast, gathering statistics on the composition of management is more difficult. In the required compensation table, SEC-filed proxy statements do contain disclosure about who are in most instances the five senior-most managers (see the statistics presented in chapter 1). Rounding up statistics about female or other diversity representation in the remainder of senior management, including the lower ranks of senior management, is difficult.
That said, no great leap is required for advocates of quotas to postulate an analogy, arguing that a quota system be extended to management levels as well. So any discussion of female leadership in information technology, whether at the director level or lower down in the management ranks, should delve into the subjects of quota laws, regulations, and programs.
Advocates of quota laws assert that no progress has been made in promoting the ascension of women to board seats and senior management positions. Appearing on the front page of USA Today under the banner headline “Women Have Made No Progress at the Top,” a smiling Sheryl Sandberg, labeled “Tech icon feminist,” asserts that there has been a “10 year stall.”12 Professor Aaron Dhir makes similar claims in his manifesto in support of a quota law for Canada. Both are incorrect.13
Even without any one specific measure or reform, let alone a legislative enactment, national jurisdictions have made gains. U.S. Fortune 500 boards of directors went from 9.6 percent women in 1995 to 20.2 percent today, not breathtaking progress but progress nonetheless, at least if one takes a view of more than ten years.14 There are twenty-three or twenty-four women CEOs in U.S. Fortune 500 corporations (the exact number varies); prior to 1997, there were none.15 Similarly, without law, Canada has progressed to a census figure of over 20 percent for women on boards of directors.16 Elsewhere, formalized but still voluntary programs have worked well. For example, the mentoring/sponsorship initiative in Australia has played a role in rapidly moving the needle from 8 to 20.1 percent among ASX 100 corporations.17
Ms. Sandberg and others use a fictionalized lack of progress as a principal plank in their arguments. Although the progress that has occurred falls short of the rate we might like to see, the progress that has occurred does significantly undercut a principal argument for adoption of quota laws or other mandatory measures.
As aforesaid, in 2003 Norway enacted a quota law that as many as 40 percent of public corporations’ directors had to be of the opposite sex of the other directors. The deadline for achievement of that goal, which public companies in Norway reached, was 2008.18
Several European Union (EU) member nations (Belgium, France, Italy, the Netherlands, Germany, and Spain) have followed Norway, a non-EU member, in adopting quota laws, as have Iceland, Israel, Switzerland, and Malaysia, among nonmember states.19 Impatience with the continued male dominance of seats on corporate boards has been growing throughout Europe and among developed countries.
As stated, parliaments in Italy, the Netherlands, and Belgium have followed Norway, enacting gender-based director laws.20 Yet the quota statutes vary considerably, most particularly in the teeth they have and in how sharp the bite will be in cases of noncompliance. For example, Spain, the second nation to act, ordered achievement of the 40 percent level by 2016, a significant jump from the 5 percent level that prevailed in Spain at the time of the law’s adoption.21 The Spanish statute, though, is aspirational, while the Norwegian law has severe penalties. Norwegian companies that fail to comply are not subject to modest penalties, such as delisting on the stock exchange or monetary penalties, but rather to the extreme penalty of outright dissolution.22
France, the third nation to act, adopted a 40 percent quota law early in 2011.23 Looking northward to Norway, a deputy of the Assemblée Nationale had introduced a 20 percent quota bill in 2006. Thereafter the notion of gender parity, at least in French corporate governance, had to negotiate a twisting route. In 2009, besides looking northward toward Norway, and adding to the momentum for adoption of a quota statute, the French quota measure’s supporters found that only 8 percent of directors in France’s largest hundred corporations were women. Further, they bemoaned that in that year French public companies added only six new women directors to corporate boards.24
The recently enacted French quota mandate was staged. Public companies’ boards had to have 20 percent women directors within three years of the enactment and 40 percent within six years (2017).25 Large French corporations were out in front of the 2014 objective, early in 2012 having passed the 24 percent mark of women directors on boards.26
Sweden, Finland, Germany, and the United Kingdom have all come out in opposition to quota laws, at least initially, for various reasons. Sweden (28.2 percent) and Finland (26 percent) already have meaningful representation of women on their corporate boards.27 Majorities in those countries view adoption of a quota law as unnecessary.
On the other hand, Germany and the United Kingdom have middling to poor and so-so records, respectively, on the issue. The United Kingdom remains openly opposed (see chapter 10), but in 2015 Germany adopted a quota law, albeit a modest one (30 percent representation), for supervisory boards (versus managing boards, for which no requirement exists) of large German publicly held companies.28 Both countries, Germany and the United Kingdom, have long traditions of bucking trends, becoming even more recalcitrant when told what to do.29 Besides Norway, EU nonmembers Israel, Iceland, and Switzerland have adopted quota laws. On the other side of the world, the Malaysian government has imposed a quota that publicly held companies there have 30 percent women directors by 2016, especially noteworthy as Malaysia is a Muslim country.30
Quota laws have unintended consequences. In the rush to name females to directorships, for instance, Norwegian companies named one—no doubt very capable—woman to eleven corporate boards.31 No one, not even Superwoman, can serve adequately on more than three or perhaps four boards, especially in the current era with its emphasis on proactive, hands-on directors. Quota laws produce a surfeit of women trophy directors—figurehead (token) directors who are possibly unqualified. Another unintended consequence of a quota law is that a public company may go private and thus go dark rather than attempt compliance with the law.32
Quota laws also may result in a surfeit of celebrity directors, who also may be regarded as tokens. Allegedly, that has happened in France, where board seats have gone to former first lady Bernadette Chirac (luxury goods retailer LVMH); Nicole Dassault, wife of the controlling shareholder (Dassault Aviation); Florence Woerth, spouse of the former minister for labor (Hermes); Brigitte Longuet, wife of the former minister of defense (broadcaster Canal Plus); and Amélie Oudéa-Castéra, former tennis professional and wife of Société Générale CEO (media group Lagardère).33 After adoption of a quota law, “in France, in private, chief executives say they will look for female board members . . . who will look decorative and not rock the boat.”34
Of course, free of a quota law, the United States has witnessed the celebrity director phenomenon as well, with an opera diva, a faux television “judge,” and spouses of U.S. senators as directors, the television judge to three and senators’ wives to five and six Fortune 500 boards of directors.35 The incidence of U.S. celebrity appointments, though, falls far short of what has occurred in France, which might be laid at the feet of France’s adoption of a quota law, concomitant with a vast increase in pressure to appoint women directors and to do so relatively quickly.
Another consequence of quota laws could be that companies downsize their boards of directors so as to reduce the number of women candidates necessary and thus lower search costs. Again, an extreme consequence may be that some companies may go private in order to evade a quota law’s requirements altogether.36
Opposition to enactment of quota laws or regulations is strong in nations such as New Zealand, a country in which women make up 59 percent of the workforce and which recently was and now again is governed by a female prime minister (Jacinda Ardern took office on October 26, 2017), yet in which many corporate executives oppose mandatory or other guidelines.37 The New Zealand Stock Exchange has publicly stated that it will not even follow its Australian counterpart, the Australian Stock Exchange (ASX), which has a requirement for companies to set and meet “voluntary” quotas for increasing the number of women at the top.38
In the United Kingdom, a recent government report urged a voluntary quota of 25 percent by 2015 but pointedly stopped short of any recommendation that the nation adopt a compulsory quota, as France, Spain, Belgium, the Netherlands, Norway, and other states have done.39 Scholars and women’s rights advocates view New Zealand and the United States as representing the forefront of the opposition, nations in which “the political climate remains firmly opposed to the notion of quotas.”40
Norway may be the most unrepresentative example to which advocates of a quota law could point. First, Norway is among the wealthiest nations on the globe, ranking fourth on one list.41 Second, Norway has a homogeneous, cohesive, and small population, numbering a shade over five million persons.42 Third, Norwegian society is among the world leaders in honesty, forthrightness, lack of corruption, and transparency.43 Fourth, last, and as previously noted, Norwegians have a bred-in-the-bone sense of gender neutrality. From play school onward, children—and later adults—are more gender-blind than the citizens of any other nation on earth, with any variance between sexes not tolerated.
The foregoing considerations make Norway the ideal candidate for imposition of a director quota law, with near-universal acceptance by the business community and the citizenry both before and after the policy’s adoption. A few other nation-states, such as Canada, may exhibit similar characteristics but are more pluralistic, since many of its citizens are imbued with libertarian attitudes. Those attributes would render adoption of quota laws improbable, or opposition fierce. Norway, or Norway alone, is a poor example from which to draw conclusions and proselytize about quota laws.
Whether progressive, liberal, or conservative, Americans have a libertarian streak. An ample majority of U.S. citizens, from all levels of society, would find a European-style quota law or regulation an extensive and unwarranted incursion into the affairs of private businesses.44 The same would be doubly true were government or a government agency to attempt to reach downward into private corporations, imposing gender quotas at various levels of senior management and on downward into middle management ranks.
Widespread American opposition may arise from several sources. Americans, or a significant percentage of them, balk at being told what to do. A major impetus to the opposition to the Affordable Care Act (the ACA, or “Obamacare”) was the “mandate.”45 Under the ACA, U.S. citizens must have health insurance, provided by their employers or, if they are unable to obtain insurance through an employer or on their own, obtained through an insurance exchange. If as citizens they had not obtained health insurance coverage, Americans had to pay not insignificant fines. A great deal of opposition to the ACA, from conservatives, libertarians, and many moderates, centered on the mandate. Americans don’t like being told what to do, nor do they want their government telling others, including corporations, what to do.
The number of director seats on larger U.S. public corporations actually is declining. Between 2000 and 2007, for example, the number of Fortune 500 corporate board seats declined, from 5,821 to 5,161.46 U.S. corporations are tending toward British, Australian, and similar governance models in which boards are significantly smaller: five, six, seven, or eight directors rather than ten, eleven, twelve, or thirteen, as in the United States.
By contrast, the number of senior management positions may be expanding. Although no statistics are available, one factor in support of the proposition is the creation or elevation of the position of chief risk officer in the last decade or so, often as an addition to the C-suite. In addition to the CEO, and the chief risk officer, the C-suite may contain the COO, CIO, CLO, CCO, CMO, and CFO.47 Regardless of the ebb and flow of available positions, many directors and aspiring senior managers regard availability of top positions as a zero-sum game. One person’s elevation to a seat or position crowds out another equally credentialed and experienced candidate. The elevation of a female to a senior position translates to fewer available openings for the majority group, in this case white middle-aged and older males.
Does such a view feed into the notion that the majority group (older corporate males) is made up largely of chauvinistic misogynists? Perhaps so (although the rhetoric seems out of the 1960s). But the explanation for opposition to quota laws and similar mandates may be more subtle.
Vilfredo Pareto (1843–1923), an Italian professor of economics at the University of Milan, accomplished many things in his life but is perhaps best known for the concept of Pareto optimality, also termed Pareto efficiency. The term describes the point at which, in the distribution of resources (in this case, executive positions), it is impossible to make any one individual better off without making another individual or group worse off.48 Promotion of women to senior executive and board positions violates inbred notions of the proper distribution of wealth and emoluments. In other words, such promotions violate the principle of Pareto optimality, or Pareto efficiency. Elevation of women and other minorities makes others—namely, the opponents to quotas and guidelines—worse off.
One of the most important twentieth-century political philosophers was John Rawls, James Bryant Conant Professor of Law at Harvard University. Professor Rawls espoused a theory somewhat parallel to Pareto’s. In A Theory of Justice, Professor Rawls attempted to build upon Rousseau’s social contract.49 What are the ingredients of an ideal social contract? A principal one is distributive justice, what Professor Rawls first termed “social justice” and later described as equivalent to basic notions of fairness.50 Social justice exists, or persists, when an unequal distribution of goods and wealth (again, here, positions in corporate hierarchies) is permitted if and only if those inequalities also benefit the worst-off members of the social unit.
If we define the social unit as those wanting to occupy and those actually occupying executive-type positions, admittedly a privileged group, the elevation of women and minorities crowds out the worst-off in Rawls’s terms: those others who are not members of the privileged subgroup (women and/or minorities). Aspiring males perceive themselves as potentially in the group made worst-off. As such, they do not receive any benefit, and possibly perceive themselves as becoming worse off, from the elevation of women, which they perceive as an unequal distribution of positions.
Application of Pareto and Rawls to explanations of the American deep-felt opposition to quota laws may be half-baked, or inarticulately presented. Be that as it may, there exist other possibilities for increasing the representation of women not as strong or hard and fast as governmentally imposed mandatory quotas.
Corporations, of course, are subject to many imperatives and quasi-imperatives that are not imposed through laws, executive orders, or agency regulations. Every day companies act pursuant to stock exchange regulations, accounting standards and bulletins, industry and trade group pacts, and so on. These quasi-governmental and nongovernmental pronouncements fit under the heading of soft law, as opposed to law, or hard law (government mandates). Soft law further breaks down into “hard” soft law or “soft” soft law. A regulation in the New York Stock Exchange or NASDAQ listing manuals constitutes hard soft law. By contrast, an “acceptable practices” guideline from a corporate governance blueprint, or an association of widget manufacturers’ guidelines, would fit more easily farther down the spectrum, perhaps under the heading of “soft” soft law.
Apropos here, the Rooney Rule, a self-imposed regulation, has been taken up and enforced by a governing body, the National Football League, and therefore fits into the category of hard soft law. The rule applies not to the ultimate hiring decision, as a quota law would, but to the penultimate decisions informing composition of the candidate short list, for head coaching and general manager positions. Football clubs that do not comply face stiff fines and other sanctions. Chapter 20 discusses the Rooney Rule and its application to information technology.
By analogy, industry groups and self-regulatory organizations could deliberate about and possibly adopt soft law variants to the hard law requirements European nations have imposed upon corporations. Voluntary acceptance of quota-type guidelines begins to resemble the pledge programs adopted in the Netherlands and in the United Kingdom and, at one time, urged in France as an alternative to a quota regulation. Advocacy groups such as the Thirty Percent Coalition, which has as its objective 30 percent women on corporate boards, or the Moving the Needle pledge/quota program of the American Council on Education, furnish further soft law analogies. Through bylaw amendments or board resolutions, many corporations have adopted self-regulatory provisions.51 While not promoting women, these bylaws and resolutions have imposed quotas on how many board seats directors may hold, reversing the growth of “trophy directors.” They thus reduce the chance that a trophy director’s appointment may crowd out qualified and younger female candidates for open positions.52
One takeaway from this chapter is that while mandatory quota laws are unpalatable, in reality many other alternatives (pledge programs, Rooney Rule variants, industry group guidelines) are soft law variants of a hard law quota system, or can be viewed in that way. Another takeaway is that while physically we leave behind quota laws and regulations, we should take with us a summary of the drawbacks to such laws and the reasons we, possibly, oppose their imposition.