If Hillary Clinton makes you weary, direct your attention momentarily to Ursula von der Leyen. Single minded. Mentally muscular. Ballsy, even.
An oft-presumed successor to German Chancellor Angela Merkel, von der Leyen is the politician who, as labour minister and against great odds, fought for statutory quotas for women on boards, because, how shall I phrase this, it’s the right thing to do.
She’s defence minister today — Germany’s first woman in the job — but she made her first big mark in her prior portfolio, waging a fight few thought could be won.
The legislation was finally approved by Parliament last March, so it is only now, in 2016, that Germany’s largest, publicly listed companies are compelled to fill 30 per cent of their supervisory board seats with women. If a woman cannot be found, the seat is left vacant. (German companies are constituted with supervisory and management boards, the former superimposed upon the latter.)
Merkel herself was initially opposed, watchful of those members of the business constituency who protest mandatory representation. In the end, the chancellor recovered her political bearings and declared the statutory gender quota “an important step for equality because it will initiate cultural change in the workplace.”
German Justice Minister Heiko Maas offered a more vibrant take, declaring the legislation “the greatest contribution to gender equality since women got the vote.” In other words, the greatest contribution in 100 years.
Here’s the message: when companies won’t budge, legislate.
Here’s the underlying message: left to their own devices, companies won’t budge.
Germany’s experience is not unique. Of course it isn’t. Watch as jurisdictions introduce voluntary quotas. Observe the snail’s pace of change across a decade or two.
Observe Ontario. Nine months after securities regulators, including the Ontario Securities Commission, adopted their so-called “comply or explain” policy, a toothless bit of silliness if ever there was one, fully 65 per cent of TSX issuers sampled reported that they had not adopted a policy aimed at identifying and nominating women directors.
Let me amend that: it’s not that those issuers had yet to adopt the recommended policy, but that they had made the decision not to adopt.
We are in the dark ages.
In 2002, women in Norway comprised six per cent of the country’s board members. The government of the day initially took the voluntary approach, appealing to publicly listed companies to up their game. That didn’t happen. The solution: amendments to company law. New rules, introduced in 2006, demanded that boards of publicly listed companies be comprised of at least 40 per cent women. That did happen.
France took a two-stage approach, giving publicly listed companies until 2014 to reach 20 per cent representation. As of next year, the requirement jumps to 40 per cent.
Iceland (40 per cent). Spain (40 per cent). Finland (40 per cent). There are too many examples to be documented here.
Some quota skeptics have been brought on board, including an initially resistant Christine Lagarde, managing director of the International Monetary Fund.
One of the arguments against quotas is that board parity, or a move toward parity, hasn’t thus far equated in the research to a significantly higher number of women in top management. Women CEOs remain as scarce as hen’s teeth.
Yet it has been demonstrated, most recently in a report this week by the Washington-based Petersen Institute for International Economics, that the representation of women in the C-suite correlates to improved corporate profitability. “For profitable firms, a move from no female leaders to 30 per cent representation is associated with a 15 per cent increase in net revenue margin,” the authors found. (The report was based on a survey of 22,000 firms across 91 countries, albeit it was a single-year snapshot.)
The researchers qualified their analysis as possibly too crude — their words — to discern the significant positive effects of board quotas. But they did cite a correlation between the presence of women on boards and the presence of women in executive ranks. “If increased gender diversity in corporate leadership contributes to firm performance, if quotas have negligible costs, and if the presence of women in the C-suite enhances the pipeline effect by encouraging more women to pursue these positions, as is often claimed, then some kind of quota system may warrant consideration.”
What we do know is that any expectations that boards will organically reshape themselves into balanced assemblies of men and women have not, and will not, be met.
In June 2014, Kellie Leitch, then Canada’s minister for the status of women, announced that a reasonable national goal was to “aspire” to 30 per cent representation on boards by 2019. The result: inertia.
I find “aspire” to be a very genderized word. Like “upset.”
Let’s choose instead “anger” and a need to “force” a dynamic outcome.
Quotas are the way forward. We can discuss a range of sanctions for failure to conform, from empty board seats (I agree) to, as in Norway, threatened dissolution for non-compliant companies (a step too far).
A chorus of voices will no doubt rise in opposition here, citing the argument that directors should be chosen on merit. Excellent idea. Move to parity and you just might find that future members are indeed chosen on merit and merit alone.