Gender quotas in the boardroom are good for everyone — here’s why

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After decades of admirable, if slow, progress toward gender balance in its boardrooms, Norway has taken a giant leap. Last month, the pioneering Nordic state mandated that 40% of seats on the boards of all large and medium-sized companies should go to women within five years.

This makes Norway the first country in the world to take such a monumental measure and it means that by next year, 8,000 companies should have hit the target quota, expanding to around 20,000 firms with more than 30 staff by 2028.

It’s a step that goes even further than anything the EU—of which Norway is not a member—has initiated. In late 2022, the European Parliament showed its commitment to corporate gender equality when it finally passed a law requiring companies to ensure that 40% of their non-executive directors, and a third of all of its directors, be women.

Norway had already instigated a similar move as early as 2005.

Norway’s trailblazing efforts to break the glass ceiling have contributed to its consistently high positioning on the Global Gender Gap report; last year it ranked third, behind Iceland and Finland.

Why quotas work

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Quotas have historically had an image problem, where they’re often seen as acts of do-gooder tokenism that enable less qualified personnel to take roles from more deserving, better-qualified candidates. However, this view is demonstrably ill-informed.

Gender quotas work in a company’s favour in measurable monetary terms. Research shows that a company’s bottom line gets a boost when it taps talent from across gender lines. In fact, some figures show that the more female managers a firm has, the more financially profitable it is.

We’ve known this for a while. A McKinsey report as early as 2017 proved the hypothesis that having more women in revenue-generating roles in organisations was directly connected to financial outperformance. It found a direct correlation between gender-balanced executive boards and better financial outcomes: diverse companies suffer less stock instability, invest more in development and see higher ROI for their investors.

Meanwhile, BoardReady, a not-for-profit organisation that fosters gender equality in business, found that during the pandemic, diversity-minded companies experienced less downside and even revenue growth.

Other indicators of an equal workplace

While many other European countries have followed the Norway model and made moves towards balancing the yin-yang of upper management in major companies through legislation, voluntary measures also have a significant impact on company cultures.

These include tying upper management’s compensation to proven diverse practices, shareholder activism, inclusivity/unconscious bias training, mentoring or sponsorship of female leaders and rolling out fully transparent hiring procedures.

While not immediately linked to a firm’s bottom line, these are the invisible, day-to-day practices that make companies more attractive to the best talent out there. For this reason, it’s easier than ever for diverse-minded job-seekers to identify the companies that value good gender equity and general employee diversity.

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