working women

Quotas Gone Wrong

Whatever you think of quotas, this is surely one way NOT to do it.

Last year (2013), India passed a law requiring all publicly listed companies to appoint at least one female director by October 2014.  That means there’s one month left for companies to comply and one reporter described the situation as “Indian Companies Need to Find Women Directors to Fill 750 Positions in 30 Days“.  Given so little progress against a hard deadline, its pretty obvious that companies haven’t taken this requirement very seriously.  A closer look explains why.

The penalty for not following the rule is a financial fine — but it’s only $8,000 USD!  Many publicly listed companies in India have relatively low sales turnover compared to American publicly listed companies but the fine is so pithy its not even a gentle slap on the wrist.  To make matters worse, one perverse outcome is that some companies have appointed non-independent, female directors (e.g. relatives, wives, sisters, etc) of the CEO or Chairman of the company.  Although they’re not alone, the best known example is Reliance Industries, one of India’s largest conglomerates which is owned by India’s richest man.  In June, Reliance appointed its CEO-owner’s wife to the Board, despite the fact that she has no obvious qualifying credentials.  Of course, there are some Indian companies that areally are trying to comply with the spirit of the law and some even had female directors before the law was passed.  And some headhunters say that the law has caused their client companies to more seriously consider diversity and look for qualified female directors.

The issue with quotas is that while they may appear well-intentioned and may even be more thoughtfully executed than in the India example, there is always a serious risk something goes wrong in the implementation.  Quotas also have very serious potential / real negative consequences: they can make the women who deserve and earn their seats feel like they are not equal to the other directors, or perpetuate harmful biases that hurt other women.  In the case of Norway, which adopted a 40% female director quota in 2003, research after a decade of implementation suggests that there was zero “trickle down effect” helpful to women outside the headline board membership figures either within those companies, or in other business contexts.

There are alternatives to simple, outright quotas of the type that India and Norway have adopted.  For example, some companies have quotas for director or senior management short-lists.  However, the final selection will not be based on quotas.  There are also organizations such as the 30 Percent Club in the UK that aspires to fill company boards so they are 30% female, but support their goal via advocacy and corporate education rather than quotas.  Collectively, those who manage companies can also simply ask and expect that individuals and their organizations make an effort.  For example, Katty Kay and Claire Shipman interviewed Christine LaGarde for their book, The Confidence Code and recount her very practical method for supporting female leadership:

She got so fed up of men coming up to her and saying, you know we’d love to have more women at the top of companies, or we’d love to have more women running things, but we just can’t find the good candidates. This annoyed her so much that she wrote down a list of 10 really good women, qualified women, and put it in her purse. Every time a man came up to her and said, “It’s such a shame we can’t find a qualified woman,” out would come the list.

 

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