'Gender quotas would benefit Sweden's corporate boards'
The Local · 8 Mar 2011, 13:51
Published: 08 Mar 2011 13:51 GMT+01:00
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There are many studies that show the benefits of corporate board diversity. Companies with more women on their board outperform their rivals, says former UK trade minister Lord Davies.
Citing a recent study, Davies explains that companies with more women on the board achieve 42 percent higher return on sales, 66 percent higher return on invested capital and 53 percent higher return on equity.
One conclusion that can be drawn from the study is that having a board which represents different views, different experiences, and different skills has a positive effect on profitability. It's at the interface of these elements where a positive dynamic and learning occurs.
One way to increase the diversity of a corporate board is through bringing more women—and the different perspectives they provide—to the table.
Women have different experiences than men because, well, they know more about what it's like to be a woman. They can thus provide valuable input on issues relating to other women. And research has shown that most buying decisions relating to families are made by women. That's an excellent feature for a corporate board member to have – an understanding of how the target customer group thinks!
Another positive trait women can bring into the boardroom is their more holistic approach to problem solving, which isn't exclusively focused on the bottom line.
Women in Sweden are also very competent and well trained in their fields, with 60 percent of Swedish women having studied at universities and colleges.
Thus, it's no excuse for owners and nominating committees to simply say "we can't find any women for the board" – they are out there to be sure. The trick is finding them.
Unfortunately, many structural hurdles remain in the board recruitment process which can result in many qualified women being excluded from the process and, ultimately, too few women on corporate boards in Sweden.
Often, potential board members are found among the personal friends of current board members. And since women have not traditionally prioritised networking in the professional sphere, this has left them at a disadvantage in the recruiting process.
As a consequence, women often don't have the networks needed to be considered for board positions. Nomination committees are also often made up of men, who then select their friends, colleague, or acquaintances from school.
Another requirement many place on potential board members is past experience as a CEO, something in which women are lagging. Only about 11 percent of CEOs in Sweden are women. And while owners can also affect the board recruitment process, there aren't many major shareholders who are women in Sweden today.
Therefore it is important that owners, nominating committees, and headhunters who are looking for qualified women look in new circles and new networks.
Fortunately, things are now starting to change and today there are networks for women seeking directorships, including Women In Progress, which I head, that help connect women board candidates to companies seeking new board members.
But new networks may not be enough to ensure that companies benefit from the diversity brought by boosting the number of women on corporate board. Another measure, which has proven successful elsewhere, is the introduction of quotas that would require company boards to have a certain number of women in their ranks.
In Norway, quotas have given the boards of listed companies a much better gender balance, resulting in boards that are 40 percent women and 60 percent men. France and Spain also have pending legislation on corporate board quotas.
European Commissioner Vivian Reding is ready to take a hard line, threatening to impose quotas from next year if companies across Europe don't improve. In Sweden, however current equality minister Nyamko Sabuni still argues that quotas are not the way to go.
Those who are against quotas argue that owners should ultimately decide who should sit on a company's board and that the decision shouldn't be dependent on a government mandate.
Of course, it's important to make the company's needs paramount in recruiting board members. But if anything, that is an argument in favour of increasing the number of women board members--and the benefits they bring in terms of new perspectives and skills.
Say what you want about quotas, but it was thanks to the threat of quotas set by former equality minister Margareta Winberg that the proportion of women increased on the boards of listed companies in Sweden from 6 percent in 2002 to 22 percent in 2010.
What's clear, however, is that efforts to bring more women into the boardrooms of Swedish companies are moving slowly. We need to influence both owners and politicians so that they think about diversity and broaden their horizons when it comes to board recruitment.
Hopefully quotas (or the threat they are perceived to be), combined with other efforts to encourage women to join corporate boards, will help Sweden set the pace among other countries in Europe when it comes to achieving a better gender balance in the boardroom.
Margareta Neld is head of Women In Progress, a professional networking and training organisation focused on coaching and professional development for women executives.