You are here: Home Knowledge Base Society Implementing Board Diversity Solutions Strict deadlines for compliance and enforced sanctions for noncompliance with quota laws must be in place for board diversity laws to be effective.
Symposium 2012

Solution for Implementing Board Diversity

The Challenge

In the wake of the global crisis, there is clear momentum towards changing the way that business is conducted—whether in the form of increased regulations, greater accountability or changing corpora ...

In the wake of the global crisis, there is clear momentum towards changing the way that business is conducted—whether in the form of increased regulations, greater accountability or changing corporate leadership. Such initiatives include changing the composition of corporate boards to include more women. What progress has been made on these initiatives and what would make them more effective?

Strict deadlines for compliance and enforced sanctions for noncompliance with quota laws must be in place for board diversity laws to be effective.

No matter which country has instituted quotas for board diversity, the initiative remains a controversial strategy for refreshing boards and ensuring equitable representation of corporate stakeholders. These mandates will only work if governments impose strict deadlines for compliance and strong sanctions for nonimplementation. Norway had a strict two-year deadline to which it adhered and companies that did not reach 40% of their board being female in that period would be dissolved. None did and many credit the strict sanctions for companies meeting the mandated percentage.

Sanctions by themselves are useless if not enforced and that requires active government oversight. Some quota laws were passed without any indication as to which agency had responsibility for ensuring compliance nor any allocation of appropriate budgets to enable such an agency to do its work. Clearly, both are necessary.

A sanction in Spain, if properly enforced, is a good example. Basically, government contracts will be granted only to companies that have met the quota requirement for women on their boards. This sanction is modeled after a similar affirmative action requirement by the US government on all federal contractors through the Office of Federal Contract Compliance. So far, no Spanish companies with government contracts have been challenged on the basis of their board composition, but given the volume of contracts issued by any government, this proposed sanction is one that could make a big difference if adopted and enforced by any country that currently has a quota for women directors.

Staggered deadlines that set a certain percentage to be reached by a specific date are helpful in guiding companies towards compliance. The French quota law set a 20% goal to be reached within three years after enactment and 40% within six years. As it turned out, France's blue chip companies have reached the 20% goal ahead of the midway date. Overall, compliance is more likely if it is understood that quotas are a temporary binding measure to accelerate women’s access to board seats.

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    Engage male corporate leaders in actively increasing the number of women directors.

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    Multilateral investment banks, government development banks and pension funds should bind their equity stakes to contractual clauses ensuring minimal gender equity on the boards of companies in which they invest.

    Multilateral investment banks, government development banks and pension funds should bind their equity stakes to contractual clauses ensuring minimal gender equity on the boards of companies in which ...

    Multilateral investment banks, government development banks and pension funds should bind their equity stakes to contractual clauses ensuring minimal gender equity on the boards of companies in which they invest.

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    Companies must work proactively to create internal policies and programs that enable women to rise to leadership roles.

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