March is upon us. It is the time when the world celebrates International Women’s Day (sometimes referred to as Women’s Week or Month.) It is a perfect opportunity to highlight the role of women in society. As the Annual General Meeting season approaches, the occasion also provides an excellent opportunity to reflect on the role of women in the board rooms and C-suite management in the corporate world.
The way business was conducted in the 20th century - using natural assets faster than nature was regenerating them - is not sustainable. The traditional capitalist growth model, the essence of which is a zero-sum game between humans and the planet is increasingly questioned. Corporates, their boards and executive leadership teams are expected to be accountable not only to their shareholders, but also to the society in which they operate.
Elected by the shareholders, and few in numbers, board members make the final judgment calls on behalf of the companies they are appointed to serve. Boards of directors make decisions that affect the wider eco-system of stakeholders. This requires a huge mind-shift among those in charge.
It is, therefore, high time to discuss the role boards should play, how they should work and how they are composed. And it’s urgent! This is what I call the boardroom revolution!
The role of women
New perspectives and fresh thoughts are needed for boards in the future., Today, very few people, if at all, dispute the positive impact stemming from having more women in leadership positions in business and industry. However, the pace of progress remains slow. Norway, often portrayed as THE land of equality, is no exception. And thus, Norway’s findings in that matter are ever more relevant for other countries.
The topic has been high on the agenda of politicians and regulators worldwide for a long time, yet no unified strategy has been agreed on. Some countries have set targets, which, to some extent, have proved efficient. In Norway we chose a radical, much debated, highly controversial, but undoubtedly efficient route. Norway instituted ‘the gender quota law’, which is actually an amendment to the Norwegian Public Limited Companies act.
The bill was intended to address and eradicate the gross underrepresentation of women on corporate boards. Companies had been given a few years to correct this imbalance on their own, but up until the time the legislation came into effect on 1 January 2008, little progress was made, and male board directors still outnumbered female directors nine to one or more.
Another objective of the gender quota law was to better utilize the talent, education and skills of the entire population of Norway. The bill’s founding principle was the belief that a broader talent base and diversity are likely to counteract “groupthink” in boardrooms and lead to better decision making. This belief is actively gaining acceptance within the investor community globally.
The gender quota law successfully achieved its stated purpose: Better-balanced boards. The boards of listed companies are now comprised of a minimum 40 % and maximum of 60 % of either gender. Organizations that endeavoured to look were able to identify, recruit, and retain women with necessary skills and relevant backgrounds. Today, the female board directors are successfully performing their board duties alongside their male colleagues.
The Nordic Gender Paradox
While the quota law was directed at the composition of corporate boards, it is sometimes criticized for not bringing in more women to the upper executive echelon of Norwegian business and industry. Now, asking that a law addressed at one issue should solve an altogether different issue, is a tall order.
Nevertheless, the fact that only 7% of Norway’s 200 largest companies has a female CEO, is an indication that the trickle-down effect that some were hoping for, turned out to be wishful thinking. It is also an indication that recruiters are not looking hard enough and, as a result, society’s resources are not being put to their best use. This should worry boards of directors, whose chief tasks include managing company assets, and appointing its CEO.
We could do better on the boards also, for while there are also a few corporate boards with more women than men, the average gender distribution is still at roughly 60 % men vs. 40 % women. And most board chairs are still male.
I should perhaps also mention that privately owned companies are not affected by the legislation, and still have a considerably lower share of female board directors than listed companies.
The global picture
Norway’s gender quota legislation made an impact not only on the Norwegian corporate boards, but also sent shock waves in the business community worldwide. Several countries and territories implemented similar quotas or targets, and many more have included gender balance recommendations in their corporate governance codes.
As a Co-founder and former Managing Director of the Norwegian Institute of Directors, former Chair of the European Confederation of Directors’ Association (ecoDa), Co-founder and former Vice-Chair of European Women on Boards (EWOB), as well as observer on the board of Global Network of Directors Institutes (GNDI), I am fortunate to follow and participate in the ongoing debate. There is definitely a positive shift in the discourse. If before the debate focused on whether gender balance on corporate boards in desirable, today it is about how we can make that balance a reality.
When I started FutureBoards a few years ago, my ambition was – and still is – to drive the debate on how and by whom our companies should be governed in the future. It was only natural that some answers were inspired by my experience with and interest in gender balance on corporate boards.
The FutureBoards Cross-Border Dialogue concept was founded on the belief that, regardless of national borders, cultures and traditions, we all can learn from each other. We are no longer concerned with the question of WHY. Instead, we aim to present the best-in-class stories, strategies, projects, surveys, recommendations and guidelines on HOW the gender balance among corporate decision makers can be improved - within a reasonable timeframe.
Our events have so far been organized in collaboration with and hosted by the Royal Norwegian Embassies in Brussels, London, Kuala Lumpur, Singapore, Bangkok and Yangon, as well as the Royal Norwegian Consulate General in Mumbai. One of the key takeaways from these events is that the road blocks for women to reach the top ranks of the corporate hierarchy transcend national borders, shareholder structures, and industries.
The fact remains that even when a sufficient number of qualified women are willing to serve in leadership positions, an existing CORPORATE culture seems to give unconscious – or, in fact, conscious – biases a free pass.
A few learnings from the FutureBoards Cross Border-Dialogues:
The difference between targets and quotas for women on boards is not material. The most important objective for the companies is to pick a strategy and work systematically towards their target or quota. Both formal and informal sanctions (such as “naming and shaming”)are effective for ensuring that companies comply with their own policies and targets.
Board training sessions, networking arenas and mentorships are some of the measures to help women gain confidence and dare to claim their place in board rooms. To shift the mindsets of corporate leaders and boards, women themselves should be aware of the skills they possess and take advantage of them.
Developing a female talent pipeline for all levels of seniority within the company ensuring is critical. If there is a block somewhere in the pipeline, fewer women will be considered for top management positions. The talent pipeline “blocks” include lack of women in certain fields, inadequate hiring promotion policies, lack of maternity leave flexibility, etc. The only effective solution is to address these blocks early on.
The investor community must step up their game. Shareholders elect board members, and thus hold the keys to the board rooms. But they also have the power to exclude companies with insufficient gender balance from their investment portfolios. At the end of the day, money talks!
Some other discussion points include gender pay gap, cultural expectations and gender roles in society.
Engage the leaders in charge by inviting more male colleagues and managers to participate in the debate.
Way forward
The discussions can be summed up in one word – ACTION! Because, even though the progress to-date is encouraging, there is still much work to be done!
Board directors are nominated and elected as equals. Each board director brings to the table a diversity of values, experience and perspectives.
Diversity is key here: Achieving greater diversity among board directors is a means to ensure that the company is better prepared for rapid changes in the markets, technology environment, economy and regulatory frameworks.
The idea is to take a step away from the old boys’ network, to avoid “groupthink” among individuals with very similar backgrounds and experience. The aim is to see alternative perspectives, be alert to alternative risk, and be aware of alternative opportunities.
Gender quotas and targets are simply the means to leverage the education, skills and experience of a larger part of the population - to the advantage of individual companies, and of society at large. That’s why we need to keep on pushing, to the benefit of us all and of the future generations.
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