You are here: Home Knowledge Base Society Board Diversity and Corporate Governance Solutions Use quota laws and enforce full implementation of these laws. Encourage greater transparency on voluntary targets and disclosure through security regulators in those countries where hard quotas are not accepted.
Symposium 2011

Solution for Board Diversity and Corporate Governance

The Challenge

The global financial crisis has led to demands for greater transparency in corporate practices. But less attention has been paid to whom the players should be in this new environment. Corporate boar ...

The global financial crisis has led to demands for greater transparency in corporate practices. But less attention has been paid to whom the players should be in this new environment. Corporate boards across the world generally have a predominance of male directors. Research shows a lack of diversity in terms of gender, race/ethnicity and international expertise at a time when “global” defines the business climate.

Use quota laws and enforce full implementation of these laws. Encourage greater transparency on voluntary targets and disclosure through security regulators in those countries where hard quotas are not accepted.

Quotas work as Norway has shown in reaching its 40% mandate for women directors in all listed companies. France went from 7.2% in 2004 to 20.1% in 2011 largely on the strength of a quota law that only passed in 2010. And Spain went from 1.9% to 9.2% over the same period, also because of a quota law enacted in 2007.

But not all quota laws are the same. Some have punitive measures for noncompliance, as in Norway, but many do not. To reach the stipulated percentage of women directors of 30–40%, there needs to be oversight, assistance to companies searching for qualified female directors, training on corporate governance for newly appointed directors and strict adherence to deadlines.

As Norway’s minister has pointed out, there also has to be political will on the part of any government to enforce these mandates. Quota-based countries in Europe have a unique opportunity to change the face of corporate leadership in the next decade.

There seems to be a particular aversion to quota systems in the US, but much more acceptance of them as an enabling and necessary mechanism in many other countries. Acceptance of board diversity quotas and targets in countries other than the US and visible successes may very well put indirect pressure on US corporations—especially those doing business globally—to set and achieve voluntary targets. This could be made even more effective (whether voluntarily or by quotas) by requiring more uniform disclosure.

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