To quota or not ?

Europe may impose quotas for women

If businesses fail to appoint more women as board members, the Commission will resort to legislation.

Although diversity has been shown to improve governance and financial performance in corporations, a tiny minority of CEOs are women, and women make up only 10% of board members in European countries. Many corporations have taken steps toward improving their diversity, but recently some European national governments have taken the position that they will regulate diversity if companies do not change voluntarily. Further, E.U. Fundamental Rights Commissioner Viviane Reding has recently warned that unless corporations act of their own accord, the Commission will use the enhanced powers of the Lisbon Treaty to impose a 20% quota on women in boardrooms.

Quotas as catalyst. Numerous studies show that diversity makes good business sense, as the combined approaches of men and women in decision-making are thought to create the most effective teams. Furthermore, with women's presence on boards, discussions tend to address a wider set of stakeholders, answers to difficult questions are more likely to be pursued and the leadership style tends to be more collaborative, improving communication within the board and with management. For changes to occur, a critical mass of three women on a board is necessary, as this is the minimum number to ensure that women's voices are heard in discussions.

To quota or not to quota. Arguments against quotas can be summarized, and countered, as follows:

--Lack of qualified women. A common complaint against boardroom quotas is that there are not enough women to fill the seats mandated. Yet many women already hold mid-level positions in companies. The real problem is one of recruitment: Men tend to recruit from their male-based networks, which can result in women being overlooked. To remedy this situation, businesses can improve their recruiting practices by widening the pool and making clear to recruiters that they will consider women.

--Quotas compromise quality. Contrary to the idea that less-qualified women would be recruited under a quota arrangement, women recruited for boardroom positions in Norway have generally undergone a more thorough vetting process and companies tend to get the best candidates out of the process.

--Childcare. A woman's career progression is slowed when there is inadequate childcare provision, or when they are perceived to be the main carer of children. Businesses can address some of the limitations by offering flexibility for workers with family responsibilities and setting up mentoring programs for women on managerial career paths. Another approach is to change men's perspectives by providing them with opportunities to take care of their children, such as the paternity-leave policies in place in Scandinavian countries.

(Published by Forbes - August 24, 2010)

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