Government action to bring about gender balance
By Arni Hole, Director General, Ministry of Children and Equality, Norway
Arni Hole, Director General, Ministry of Children and Equality, Norway
Companies have to compete for the best brainpower and skills, often at an international level. It goes without saying that one has to look for this amongst the whole population, not only within the male half of it. Talent is evenly divided between the genders and women number more than half of the university educated persons in many countries.
A company board that has to take strategic decisions and make long-term planning benefits from diversity and gender balance to mirror and match markets, new demands and diverse groups of buyers as well as upcoming products, technologies and services.
“The Cabinet and the Parliament intended to make sure that boardrooms should cease to be a male reserve.”
Why Norway took action
Although Norway is strongly committed to gender equality, it still lagged behind in terms of gender balance in the corporate sector. Counting only 7% women on the boards of Public Limited Companies in 2003 and less than 40% in the state-owned enterprises, the Government decided to act using affirmative action.
A proposition was presented to Parliament in Spring 2003 to introduce a legal requirement for at least 40% of boards to be filled by the under-represented gender.
This legal proposition called for the regulation of the 500 PLC’s in Norway as well as all of the wholly state-owned and inter-municipal companies.
The intention was to make sure that both genders were represented on the boards of companies that either have a broad spread of shares or are publicly owned. Both types were deemed to have a distinct responsibility for diversity and democratic representation. Neither of them could afford not to make full use of all the talent available. The Cabinet and the Parliament intended to make sure that boardrooms should cease to be a male reserve.
“A company could be dissolved by court if it was found to be not complying with the law.”
In November 2003 the Norwegian Parliament voted for the new legal requirement with a majority. Later on, an amendment ensured that the same sanctions were applied as those used in earlier requirements for a board to be legal: A company could be dissolved by court if it was found to be not complying with the law.
The law concerning the state owned and inter-municipal companies went into force by January 2004, with a two year period of transition. They had all complied by January 2006.
The law affecting the PLC’s was not enforced until January 1st 2006, also with a two year transition period.
The reason for postponing the enforcement was the expectation that these companies would follow suit voluntarily, with the Parliamentary decision setting a norm, but not being legally binding. But they did not take action during 2004 and 2005, and so the Government decided to move to full enforcement.
By Spring 2008, most of them had complied, according to the Norwegian National Business register. The proportion of female board members had increased from 7% in 2003 to 39% in July 2008.
Opposition from big business
The voices from the corporate sector were rather critical in November 2003 and for a few years after. Where would they find the women capable of taking on the responsibilities of board directors? This legal measure is a disagreeable and unwelcome intervention by the State in the private business sector?
The main Business Federation of Norway nevertheless set up its own recruitment program called Female Future, which has been a great success. Databases were set up and the National Public Investment Fund provides training courses around the country. These measures have made a difference in the ability of companies to find and recruit capable women.
“The main Business Federation of Norway nevertheless set up its own recruitment program called Female Future, which has been a great success.”
Fairness, democracy and business sense
In contrast, today hardly any voices are raised against the policy to bring about gender balance. On the contrary, corporate leaders say that this was a necessary reform, that they needed something dramatic to open up their eyes to the talent they were missing out on, and that in the end the women were not hard to find. Businesses just had to look outside the “old boy’s club” and traditionally male board room networks.
The reform has been a success for the businesses concerned, including the enhancement of their corporate reputation in their markets. Many women have experienced being approached also for top management jobs. Able women are now visible in corporate Norway.
Whether the law governing the majority of Norwegian privately owned companies also should be amended, is being discussed. Some of those are actually quite large. The vast bulk, however, are small and medium sized. The Government is at present looking into the possibility of regulating the many municipally-owned companies, representing vital public interests on the local level.
The lessons learned are certainly positive and serve both economic goals as well as democracy and fairness. Research has shown that diversity is good for a business’ bottom-line.
Other countries could follow suit, as Spain has more or less done. Certainly modern nations and the corporate sector cannot wait another 50 years to employ all the talented people available, of either gender. Politics should be about having a vision for the future, as in the case of Norway and the legal action for gender balance on company boards.
Women on the board: Norway's five year journey
Proposition to Parliament to introduce the 40% quota for an “under represented gender” covering 500 PLC’s and all state-owned and inter-municipal companies in Norway
Norwegian parliament voted for the law with a majority (amendment added later to enable courts to dissolve a company if it was found not to be complying with the law)
The law came into force in regard to state-owned and inter-municipal companies, allowing for a two year period of transition
Private PLC’s given two years to get their own houses in order
All state-owned and inter-municipal companies had complied with the law
Private PLC’s had not changed and therefore, the Government enforced the law in regard to the PLC’s, giving them the same two year period to make the change
Most PLC’s had complied with the new law
In 2003, 7% of their boards were made up of females and by July 2008 it had increased to 39%
Editorial Note: Where's the evidence that this works?
Most people outside Norway ask for the evidence to show that having more women on the board has improved performance in business. Arni Hole is somewhat outraged that anyone should ask this question. When did we ask for “evidence” that men could rule the board-rooms?, she says.
Nonetheless, for the sceptics out there evidence is mounting up. Hole’s Ministry is building its case upon several studies done by Catalyst in the US, the Danish Business School and the Oslo Business school. There are also more studies coming up in Norway, following the implementation of the laws relating to quotas. In Fall 2008, her Ministry will ask scientists to do an independent study to “measure” the achievements when the law has been in force for some time.
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