Women on boards
a step forward
Italy has a brand new law that garantees gender balance on boards, a law that is necessary but it's not enough. Interview with Morten Huse, scholar of corporate governance that studied the impact of women on business performance.
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A new law introducing the principle of gender diversity on boards of listed companies was approved in Italy the past july. Norway was one the first countries to introduce juridical measures to improve the presence of women in corporate boards, we interviewed Morten Huse, a scholar of corporate governance.
In Norway there’s a law thought to guarantee the presence of women on boards. When was it introduced and to what type of corporations is it applied?
Many steps were needed. The law was announced in 2002, then it was formally introduces in 2003 and finally ratified in 2005, and implemented in 2008, so it’s actually very close to four years from sanctioning. The law applies to the publicly tradable companies, the so called A.s.a. companies, that in Norway are not only the listed companies but something wider.
Did the numbers of women on boards increased?
When looking at figures there are at least two things to remember. If we are going to see the numbers of women on boards in Norway, we find that sometimes it is in 39 or 38%, because the law is not simply saying that 40% is needed, it tells that gender balance is needed, and so at each step a number is indicated. For example if you have three members in the board, at least one of the less represented sex should be present, so it is 33%, and if you have four persons in the board it will be fifty-fifty, that means it’s not exactly forty per cent, but it goes closer to the forty per cent as possible. Another thing is what type of companies do we talk about, many comparisons are just taking for example the 20 largest corporations in Norway, but we need to be a bit careful when comparing because there might be certain corporations that are among the largest ones which are not subject to the law. For example in 2007 a new law was introduced in Norway saying that finance corporations did not need to be publicly tradable, and many of them were happy to get away from the publicly tradable partly because they did not want to meet the criteria of the law. Today the discussion if all the largest corporations should have that law and with what percentage, if between 25 and 40%.
And, in general, what are the outcomes of the law?
In the debate before the introduction of the law it was said that this law would ruin the nation economy; that the law would be impossible to implement and if it was implemented, there would be not enough suitable women to fill those positions in the board, so the women being recruited would not be qualified, or that there would be a big need to go outside Norway to find all the women to fill the board positions, or that they would have been taken from private companies. First of all today the Norwegian economy is not ruined. The second thing is that there are still women on the boards of companies not subject to the law, and even there was a slight increase in the larger ones, those with more than two hundred employees. On the contrary, there was a reduction in the smallest firms. But they were replaced because they are women but because in the past those boards were formed only because formally they needed it, and usually they appointed some available names, for example families or friends. For this reason typically there already was a large percentage of women in very smallest firms, for long time ago, and in the last years, trying to improve their performance, many have started to get more professional board taking not the closest person but someone with experience. So in the smallest family firms we see at least some years ago a reduction of the number of women. And then if we take the number of all firms it seems that this law has not really been helping anything: there’s just an increase from 17 to 18% but there are included also the very small ones, which are not subject to the law. So the evaluation of the law depends form where you look at.
Did the Norwegian state implement special policy measures to achieve the goal of gender diversity?
It was done a a long time before the introduction of the law. For many years there had been high emphasis on different programs to increase the numbers of women on boards, and they were developed both from the government but also from different feminist groups, that had different feminist networks and really wanted to get women in the forefront and in top positions. The argument that it's positive to have women on boards been developed for a long time. Besides there have been training programs for women to facicilate to get better into those positions and they were asked by different associations and groups and the government at early stage. For example in 1995 I was teaching on a programme called women to the top, and that was an initiative by employers union, the Nho. And over many years were made different kind of database and registers. For example the minister of equality prepared a register with some 3 thousends women with high competence. So thare were many activities taking place for a long time, and as the law came, additional measures were made, like the Female Future project. The creator of Female Future was one woman having no background in boards at all, no background in politics, no background in feminist issues, but she knew many women with solid background in Norway and she started inviting men that had a possibility to select women on the boards, so she was putting them together, the women she was believing in and the men she knew they had the possibility to make the decision, and that was working, her network really got into many positions in that period.
In Italy we have a fresh new law promoting women on boards. Do you have any advice for us? How can we preoceed in order to achieve positive results?
There are many things that are important, you need to combine different things, it's a total picture. In Norway there were lots of training programs, and also in formal levels, but nothing really happened before the law came. And there are different insitutions coming around, we cannot just comapare. In Norway we have a long history of gender balance in many settings and beside the politics we have social and welfare systems that supports equality. In the workplace there's the paternity leaves, and in Norway it'a arranged to have a total period of leave and if the father doesen’t take his period of leave that part will desappear.
What changes in corporations once women obtain positions on the boards? You recently commented positivelly the results of a study on the impact of women on corporations (Boerner, Keding, Hüttermann 2012). The study highlighted how easily many scholars conclude that there is a positive correlation between the women presence in boards and the company performances. Could you please comment for us your position?
Actually I was impressed to see that article, because it’s very rare to see articles that go so in depth in that topic. I think it’s a good article, but I can see it causes some frustration because it tells that you cannot really trust too simple arguments. I think women on board improve the performance of the board by the way they act in the board, and that will vary in many different settings.
When talking about divesity we need to go beyond that surface level and understand what really we are looking for. The concept of female is not only the physical genre, but it may be intended as values. But there are somebody that have been studying values in top management teams and top managers, and sometimes women are more masculine than men, but there are clearly man having having female values. And also we know there are many women that are quite masculine in their behaviour. And not all women are feminist, and not all women are talking about the same issues.
At the individual level, we may also think about how the individual react when interact with others, so it’s complex, and I found that article showing more of this complexity than most of the other things I’ve been seeing, and knowing this complexity I have huge problems in accepting the researches being conducted or the reports being written by McKinsey, Deloitte and all these companies that do not really go into complexity, they just count the number of women in the companies, that’s the point of that article. There are many things that are happening in the boardroom and that’s what I tried to do: to see what’s happening in the boardroom, both because of the law and things related to deep level diversity, and in the many studies I’ve been doing on the topic there are different types of impacts that we need to understand, and certainly there are certain things that we can see as positive also with women but we need to understrand what we’re talking about. So it's difficult to evaluate the impact of women on boards and it’s even more difficult to evaluate the general impact of the law, because many of these things are still changing, the women being in the companies in Norway are not necessary the women that we’ll se in future, and even thou they are very well qualified they’re still learning, it’a a development of their knowledge that reflects on th th boardroom also and so on the society. The change will take place in a long time.