Some very interesting findings have come out of the ‘women on boards’ debate and, as Helena Morrisey put it recently, the question is not now ‘why’ but ‘how’ to achieve more balanced boards. The debate continues, however, with the argument about quotas – are they targets with teeth, or a threat to civilisation as we know it?
The case against is made strongly in ‘Leading the Way: a case against quotas for female executive appointments’. Maria Yannakoudakis’s argument hinges on the aftermath of the quota legislation imposed by Norway in 2003, which required public limited companies to achieve 40% female representation to their boards from 2006, with a hard deadline by the start of 2008. Yannakoudakis asserts that if similar quotas were applied over here, this would “…erase anything between £60.58 billion and £81.55 billion from the market capitalization of UK listed firms.”
The sheer size of this risk merits a sanity check. Will female non-executives really do so much damage on UK boards, and to take this argument to its logical conclusion, should they not then be banned entirely? To make the case against quotas, ‘Leading the Way’ treads a difficult line – arguing the case for voluntary targets whilst disputing that female non-executives add any value.
It’s worth going back to the extensive study by Ahern and Dittmar, who studied the ‘before and after’ quota effects on Norwegian publicly listed firms. Firstly, the initial 3.5% drop in stock market values caused by the surprise announcement of quotas applied to the 70% companies in the sample with all-male boards only. There was no discernable impact on boards that already had one or more female directors. The longer-term analysis of the study – which had to filter out the effects of two global recessions – finally attributed the relative reduction in the value of Norwegian firms to increased merger / acquisition activities. The link to female board members is implied but the authors note that there is no causal link.
A key conclusion of Ahern is that “…the quota-led ﬁrms grow in size, make more acquisitions, and realize worse accounting returns.” This spending spree seems hard to pin on the female non-exec directors. Since M&A is a binary event, the accusation seems to be that the female non-executives did not stop the majority male boards from making poor acquisitions! What were they thinking?
This all goes to show the importance of interrogating the findings beyond the headlines. Boardcircle receives as much interest from women as men, if not more, and we do not see any difference in talent with SME directors. What we do think is that there is a cultural bias to be overcome about what a leader ‘looks like’.
This makes it an uphill battle for women to be selected for leadership positions. But it’s a battle worth fighting. If you take anything from the research, it should be that the slow adopters towards gender balance will not be the high performers in the long run. In the end, a greater number of women on boards isn’t just better for women: it’s better for business.
Martin Hawley is the founder of Boardcircle. His vision is for companies to help each other by sharing some of their directors’ time as non-executives. He sees the non-exec role as one that is done by a diverse group of talented people, benefiting business and society alike.