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How to deal with board gender quotas

by Ace Damon
How to deal with board gender quotas

"It's like smoking; after all, just one hard intervention has made people change," says Jochem Overbosch, Amsterdam's executive recruiter. on the company's board of directors, which the Dutch parliament voted this month after weaker targets failed to move the needle too much. Employers say they approve. Assuming everything goes according to plan, the Netherlands will join seven European countries to California) replacing the "please" carrot with the "or" stick to increase gender diversity.

Will it make a difference? Corporate quotas – such as fines in Italy or delisting in Norway – increased the presence of women in the boardroom. Companies with more women seem to work better, with greater participation and tighter management monitoring. But no discernible impact on company performance has been identified. And the expected expected effect – by which more board women would increase the ranks of executive women – has not yet materialized.

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Still, quotas are here to stay. No country has lifted the existing posts so far (although the Dutch insist theirs are temporary). Best practice is work in progress, but some pros and cons are becoming clear. Formalizing selection processes to avoid a shortlist of the president's colleagues, for example, by hiring an outside research firm, like most British firms, but only two-fifths of US firms, is a good idea; helps prevent inadvertent double standards. The same goes for broadening the selection criteria to a multitude of narrow criteria, such as years of executive experience or industry knowledge. Ensuring that more than one woman can be on the shortlist also helps; Research has shown that a lonely woman on the final list (or minority representative) has little chance of getting the job.

Companies should avoid looking for a “pink unicorn” that ticks every box possible, recommends Laura Sanderson of Russell Reynolds, an executive search firm. The dissemination of desired skills through various future commitments makes it easier to find female candidates with at least some of them (or male). Short, fixed terms for board members facilitate renewal. This helps to explain why in Britain, which adopted them, the councils are 30% female, while in America, which did not happen, progress has been signaled despite corporate gender equality professions.

Critics say advice is the wrong thing to focus on – a symptom of gender inequality in the workplace, not its cause. A study published recently 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 climbed the ranks faster than those with women. Female managers do not appear to be equally partial to subordinates, which may help explain why board quotas have no effect on management's gender mix.

The Dutch quota requires 30% of seats in large listed companies to be occupied by women. That translates to 66 extra board members, plus the 122 who already hold these positions, estimates Mijntje Lückerath of Tilburg University. Annet Aris, herself a member of various boards, admits that the new law is "too much noise for a small group of women." But, she adds, "it's still a very important sign."

And the signals matter, especially to ESG investors, who care about companies' environmental, social and governance performance, as well as their bottom line. Fortunately, gender diversity on boards is easier than most ESG metrics. It's getting harder and harder to get around. ■

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