Are mandatory quotas the answer?
GovernanceMetrics International (GMI) released its annual 2012 Women on Board survey that shows progression towards boardroom diversity across the globe.
The study coincides with International Women’s Day, a theme designated by the United Nations to raise social awareness of the many struggles women face worldwide. In terms of reaching for the glass ceiling, the survey takes an in-depth look at women’s participation in international boardrooms by compiling records from 4,300 firms in 45 different countries. Today, about 60 percent of companies have at least one female director and 9.8 percent have three or more women who quickly rose to the top echelons in companies.
In the US, however, the percentage of women on boards grows at a glacial pace. The report says the presence of women on boards only increased by 0.5 percent in 2009-2011 and has reached 12.6 percent this year, well below the figures for Nordic countries, Canada Australia and France. Over 70 percent of US boards have at least one female director and roughly 10 percent have three or more women. The lowest proportion can be seen in the 2 percent of female board chairs.
This year France took the winner’s title while Australia locked in second place. Why? The answer is simple: legislation. According to the report, when France’s National Assembly passed a law in 2010 requiring French boards to have 20 percent female composition within three years and 40 percent in six, the number of women instantly accelerated. Now the percentage of female representation in France has reach an all time high at 16.6 percent.
Australia, however, has seen a 3.5 percentage jump in the number of women directors in the last year, taking it to 13.8 percent with 68.5 percent of the country’s companies having at least one female director in place. Australia may be handling this matter slightly different since the country has not implemented any legislation calling for mandatory quotas.
‘This heterogeneity reflects the wide range of approaches countries are taking with respect to board diversity,’ says GMI director of research Kimberly Gladman, PhD and an author of the report. ‘In the past year, France has seen the largest increase in female directors, due to a legal requirement. Australia has also made significant gains, in response to a corporate governance code change and a mentoring program by the Australian Institute of Company Directors.’
It is still hotly debated whether mandatory quotas are the right solution for boardroom diversity. In December, the Institute of Corporate Directors (ICD) published a report, entitled ‘Diversity in the Boardroom: Findings and Recommendations of the ICD,’ which revealed that a staggering majority of survey participants are strongly against government-imposed quotas or legislated mandates, as in some European countries where companies are required by law to report their diversity efforts. Of those surveyed, 90 percent agree that board diversity is a hot governance issue and 80 percent believe a diversified boardroom results in more informed decision making.
Just 4 percent of respondents were in favor of such measures, says the association, which represents corporate directors across Canada. Of those surveyed, 90 percent agree that board diversity is a hot governance issue and 80 percent believe a diversified boardroom results in more informed decision making.
Canada has successful promoted boardroom diversity by having 19.4 percent of female representation.
These moves have prompted the US to take heed of what other countries are doing. For example, the largest pension funds, California Public Employees’ Retirement System and the California State Teachers’ Retirement System, together with GMI Ratings, have created the Diverse Director DataSource (3D) – a resource where directors can nominate themselves for inclusion in the system by providing extensive detail on their qualifications and interests.
