Last week’s New York Times Room For Debate column addressed the theme “Using Quotas to Raise the Glass Ceiling.” Although some of the Room for Debate contributors discuss quotas more generally, others specifically address board diversity quotas. As I’ve noted here before, Norway’s 2002 law requires that 40 percent of all board seats at state-owned and publicly listed companies be held by women.
According to the Times, “since then, Spain and the Netherlands have passed similar laws. Now Belgium, Britain, Germany, France and Sweden are considering legislative measures involving female quotas. And although Germany is also debating such a law, Deutsche Telekom, which is based in Bonn, announced last week that it would voluntarily introduce a quota aiming to fill 30 percent of upper and middle management jobs with women by the end of 2015.” In addition, as I mentioned here last week, Canada has a pending private senator's bill that would mandate gender parity on boards (though the bill has been tabled at first reading and has not been referred to committee since it was tabled).
But the question posed to the Room for Debate participants is: Do quotas work? Would they work in the U.S.? Does the U.S. need them?
Of particular interest is the response of Amy Dittmar, an associate professor of finance at the Ross School of Business at the University of Michigan, who discusses her study with Kenneth Ahern, also at the University of Michigan. Their study examined the effect of the Norwegian law on boards and firm value. Ahern and Dittmar found that:
the women that were added to boards to comply with the law had less experience in upper management than their male counterparts and than women who were chosen before the law went into effect. On average, the firms experienced a 2.6 percent drop in company value at the announcement of the new law and, if they had no women on their board, they experienced a 5 percent drop in value. Firms experienced further declines in value over the year that they changed their boards to comply with the law.
Dittmar cautions that the drop in value was not due to the presence of women on boards, but because of less experienced directors on boards.
The other commenters are:
Marit Hoel, Center for Corporate Diversity, Oslo
Peter Baldwin, author, “The Narcissism of Minor Differences”
Sharon Meers, former managing director at Goldman Sachs
Linda Hirshman, author, “Get to Work”
(HT: Max Eichner)
Board diversity and, particularly, the empirical work on its effects, is a topic that has been much discussed here at the Lounge. As I mentioned earlier, Duke, UNC, and Duke Energy are sponsoring an entire conference dedicated to the subject next month. For prior Lounge discussions of board diversity, and especially its impact on corporate performance, see:
Vancouver Rocks! (Part II)
“Meddling Women” In The Boardroom
Substantial Evidence or Substantial Uncertainty? If Gender Diversity on Boards Clearly Adds Value, Then Why Are There So Few Women on Boards?
Sotomayor, Diversity, And Group Dynamics: Why Do We Care? What Do We Know?
Do The Right Thing – So Long As It’s Free
Money Is Diversity, Or Diversity Is Money?
What Corporate Insiders Say About Why Diversity Matters
Wrapping It Up: The Struggle To Explain Why Difference Makes a Difference