Looking at the big picture on gender diversity

By Claire Braund, Executive Director Women on Boards

Background

The Quota Law requiring companies to appoint 40 per cent of the under-represented gender to their boards was announced by Angsar Gabrielson, Minister for Trade and Industry in a conservative government, in 2002 and approved by Parliament in 2003. The law affecting state owned and inter-municipal companies went into force by January 2004, with a two year period of transition.  The law affecting around 500 public listed companies was enforced in 2006, with most complying by July 2008. About 100 companies also delisted from the Stock Exchange in this time so were not required to comply. Norwegian business leaders at the conference felt this was mainly due to other legislative requirements however there was an element of ‘quota avoidance.’

The way Mr Gabrielson told the story to the Conference he decided that action needed to be taken on gender diversity so sent a personal hand written invitation to 100 people to attend a special function on International Women’s Day (8 March) in 2002. He told the seven senior company chairs who attended with 93 women that this was how Norway’s boardrooms looked. He then announced his intention to introduce the legislation into Parliament in the newspaper the next day and told the Prime Minister’s Chief of Staff who called to query the press, “I said it, I meant it and I stand for it.”

The announcement created uproar in Norway and its media, with many articles predicting a fall in the stock market and other disasters. Mr Gabrielson was not supported by his party and received hate mail. However, the idea was not without precedent, as in the 1980s companies had been required to have an employee representative on their boards.

Outcomes

Some key messages came out of the Boardroom Impact Conference:

1. The Quota Law is now widely accepted in Norway by the business, shareholder and wider community.
2. The law has played a pivotal role in making women’s talent and experience visible.
3. Business leaders and directors (male and female) who were philosophically opposed to the law nonetheless believe it was necessary to force companies to change.
4. The governance of Norwegian companies has been improved by the Quota Law with a greater focus on selection criteria for directors.
5. Having a champion who was male, a conservative politician and not the minister for gender equality as was critical to getting the legislation through Parliament.

The other very interesting issue to emerge from the conference was the research showing that the Quota Law has had little spill over effect on the numbers of women in senior management and executive roles.

The Norwegian Institute for Social Research at the University of Oslo conducted the first major study of the impact of the Norwegian quota law on boards in late 2009. Report authors, Mari Tegan and Vibeke Heindenreich, reported to the Conference that since July 2008 there had been little evidence of an increase in women’s access to a wider scope of management positions.

Stressing that it may have been too early for a trickle down impact to be felt, Ms Tegan said that the research found an almost a total absence of female CEOs of Public Listed Companies. Only 10 per cent of senior managers were women.

There were few reasons given for this other than there are fewer numbers of women from which todraw for board roles, creating a potential vacuum in management ranks, and the generous parental leave program can create a disincentive for women to return to work.

Other findings from the survey in which 503 male and 370 female directors participated were:

1. More young women are being recruited into board roles to fill the quota, leading to a significant age gap in the boardroom.
   - 19 % of female board members are < 40
   - 72 % are < 50 compared with 35 % of male directors
   - 6 % of female directors are > 60 compared with 29 % of male directors
2. Golden skirts are more likely to be worn by men with 79 % of women holding only one directorship.
3. The educational level of female board members is higher than that of male directors, with 92% of women having a least one university degree compared with at 87 % of men.
   - The difference in the type of education is small with 50% of both groups educated in business management, followed by science/ technology and then law.
4. Male directors are more often business owners while women are more likely to be drawn from management ranks.
   - 11 % of female directors had major ownership interests in the company compared with 35 % of men
   - 77 % of female directors are independent compared with 45 % of men
   - Increased director independence is leading to the power of large owners on boards diminishing.
5. 33 % of female directors and 60 % of male directors said nothing much had changed in the functioning of the board.
6. 12 % of men said the board had been improved by the increase in the number of women and 11 % said diversity made it harder work to manage the board.
7. The majority said that more women on the board led to new perspectives and more issues being added to the board agenda.
8. Recruitment processes had not changed significantly and women were being recruited the same way as men – via professional networks and personal contacts. Government databases of women or head hunters are not being widely used by Public Listed Companies in Norway.

Conclusion

In summary, the general feeling of the Conference and the business and government leaders who attended, was that the Quota Law had produced the right big picture outcome for Norway in ensuring women were well represented in the nation’s boardrooms. With this goal in mind Norway achieved what it set out to do – create a more equal society – so the means was justified by the ends. They have now moved onto looking the more technical issue of increasing the numbers of women at management and executive levels, providing pathways for them to stay in operational roles and improving the quality of the governance of all their companies through director training.

In Australia we could argue we are paying attention to the last three items, but have not tackled the real issue of changing the way the picture looks at the top. In other words, we are focussed on the processes, but do not have an end goal in mind. Is it 40 per cent or, will the market ‘sort this out. For many women in Australia the words of Audun Lysbakken, the Norwegian Minister for Children, Equality and Gender, who told the Conference, “sometimes most effective way of changing stereotypes is to introduce radical changes,” ring very true.

The real question is are we really ready to change the way we think about gender diversity and take a big picture bold action approach or will our conservation masculine culture prevail?