It came as a huge shock to the Norwegian public when then Minister of Trade and Industry Ansgar Gabrielsen of the Conservative Party introduced a mandatory gender quota of 40 percent for the boards of all public limited companies.
“There had been little debate about this prior to the announcement, and few people actually understood what a gender quota was,” says Terjesen, who is a professor at the Kogod School of Business, American University, and an adjunct professor at the Norwegian School of Economics in Bergen.
She explains that the scheme faced substantial opposition in the beginning.
“Norwegians were used to the state having internal regulations, but it was highly unusual for the government to intervene so actively in the affairs of private companies. In particular, employers, both companies and employers’ associations such as the Confederation of Norwegian Enterprise, strongly opposed the gender quota. At first a small group of prominent businesswomen circulated as board members in several companies at the same time, but now it has evened out.”
Together with Ruth Sealey of City University London, Terjesen has reviewed newspaper articles about gender quotas in the years immediately following the announcement. They found that companies were very negative from the outset.
“Over time, however, we see that there is almost unanimous agreement about the scheme among companies as well as the general public,” says Terjesen.
“Female representation in society is shaped like a pyramid.”
In an international context, only Norway and Iceland have succeeded in reaching their national quota objectives for female representation on boards.
“We see that we have made great progress on gender equality, but that female representation in society is shaped like a pyramid,” she says.
“Women are well represented in the educational system and the labour force, but at the top of the power hierarchy they are still surprisingly poorly represented. It is the strict enforcement of sanctions that is the key to understanding Norway’s success with gender quotas for boards.”
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Terjesen explains that if a company breaks the gender quota rules in Norway it will be denied registration as a business enterprise in the Brønnøysund Register Centre and be subject to forced dissolution by the courts. So far, no company has been sanctioned.
“We see that Norway is one of the countries where companies face genuine, financial consequences for not following the rules. In contrast, there has been little research on whether the Spanish government’s threat of fewer state contracts for companies that do not meet the gender quota is actually enforced in practice. Norway has more of a culture where people expect that politicians will follow up on their promises.”
Although the gender quota law has been effective in achieving better gender balance in Norwegian boardrooms, research shows that only nine of the 126 largest companies in Norway have female CEOs.
According to Terjesen, gender equality measures that do not involve quotas are often tactics used by companies to avoid more active intervention from the government.
“Iceland has not adopted sanctions for companies that do not live up to the quotas, but since it is such a small country we are talking about very few companies. In Norway, studies have shown that initiatives which came prior to the quota system, such as mentoring schemes, networking meetings and publicly available databases of female managers, had little effect.”
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The article by Terjesen and Sealy represents a very ambitious project that compares research conducted on gender quotas on boards in an international perspective.
“The new thing about this study is that we took our point of departure in all existing research done to date, both quantitative and qualitative,” says Terjesen.
They did a systematic review of the research and cross-referenced data on findings from both Norwegian and international researchers, such as from the US or Spain, about the situation for women in boardrooms.
“Gender quotas for boards are closely tied to the country’s history of institutional awareness of gender equality.”
“One of the main trends we found was that gender quotas for boards are closely tied to the country’s history of institutional awareness of gender equality. The higher the percentage of women in the labour force, and the more state gender equality initiatives the country has implemented, the more likely it is that quotas will be used as a political measure,” says Terjesen.
“Countries with a tradition of more left-wing governments and generally more state intervention in the economy are more likely to introduce gender quotas. This is why it has been easier to introduce quotas in Norway and France than in the UK or the US.”
She points out that in order for quotas to be effective, the idea of gender quotas must have legitimacy in the political culture at large.
“Norway was the first country to introduce quotas, and so far it is the country with the greatest success in reaching the goal of 40 percent female representation on boards.”
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Change at 33 percent
“What happens in a boardroom with a higher percentage of women? What difference does it make?”
“We see that female representation makes a difference only when a critical mass is reached,” says Terjesen.
She found that this critical mass is achieved at one-third female representation – that is, 33 percent or more women on a board.
“If the percentage is lower than this, the effect is little more than symbolic. It is when women feel that there are several of them, that they are not sitting alone at the table, that they begin to exercise their power.”
“Boards that meet the quota requirement report having better discussions and more productive conversations.
Terjesen points out that the quantitative research previously done on the impact of female board members on a company’s earnings is often deficient.
“It’s very difficult to isolate female representation on boards as an individual phenomenon, and based on that draw conclusions about a company’s performance in general, especially in the short term,” explains Terjesen.
“Studies show, however, that boards that meet the quota requirement report having better discussions and more productive conversations. Women often come onto board with more wide-ranging experience and a broader employment background than men, and studies show that they ask tougher questions and are more concerned with challenging the status quo.”
Terjesen also says that female board members report a higher degree of satisfaction after quotas were introduced.
“They also say that they identify more with the board and their role as a board member on both a professional and a personal level.”
Translated by Connie Stultz
In accordance with Norwegian law, 40 percent of both genders must be represented on the boards of public limited companies. The law was introduced by Minister of Trade and Industry Ansgar Gabrielsen in 2002 because he was “tired of the old boys’ network”.
When Norway became the first country in the world to introduce gender quotas in boardrooms, women comprised only seven percent of the board members in Norwegian companies and state enterprises.
Other countries have taken Norway’s lead. Spain and the Netherlands introduced similar regulations shortly afterwards, and France enacted a new law ensuring 40 percent female representation on boards by 2017. Italy introduced a law requiring one-third women on boards beginning in 2015, and in both India and the United Arab Emirates at least one board member must be a woman. However, only Norway and Iceland have succeeded in meeting the quota requirements.
Sources: regjeringen.no and “Norsk Kvinnekvotering i styrene har beveget Europa”, (“Norwegian gender quotas on boards have moved Europe ahead”), Aftenposten, 14 February 2014.
The article “Board Gender Quotas: Exploring Ethical Tensions from a Multi-Theoretical Perspective” by Siri Terjesen (Indiana University) and Ruth Sealy (City University London) was published in Business Ethics Quarterly in 2016. It is a systematic review of the existing literature and research on the issue of gender quotas in boardrooms in an international perspective.
Their research shows that countries which check compliance with the quota laws and impose sanctions for non-compliance, and which have a political culture of state intervention, have a stronger foundation for increasing gender balance on company boards.