The Norwegian Experiment

Not surprisingly there was considerable backlash against Norway’s 2003 law mandating that women make up 40 percent of corporate boards (see April 22 blog “Addressing Corporate Fraud: Norway’s 40% Solution”). The most common objection was that there were insufficient qualified women in Norway. In fact one male executive complained that boards would have to recruit “escorts” to meet the quota. There were also dire predictions that replacing male board members with females would cause boards to lose their expertise, that shareholder confidence would plummet and that overseas investors would withdraw their holdings from Norway and take them elsewhere.

Is the Experiment Working?

Obviously none of the dire predictions for Norwegian corporations came to pass. Norwegian business women responded to the new law by creating a plethora of women-focused executive search firms and training, mentoring and networking programs. Moreover most of the 300 women who have taken seats on Norway’s are better educated and qualified than the men they replaced.

It’s too early to measure the effect of these changes on financial and other performance indicators. Results of a study investigating the effects of Norway’s new gender quota should be available by 2012. Results from other studies demonstrate clear positive outcomes from including women in the boardroom. One study last year by the influential New York think-tank Catalyst, which ranked hundreds of Fortune-500 companies by the percentage of women on their boards, found the top quarter outperformed those in the bottom quarter with a 53% higher return on equity. A second 2007 report, by the international management consultants McKinsey, looked at 89 top European companies and found those where women were most strongly represented on both the board and at senior-management level outperformed others in their sector in return on equity and stock-price growth.

Women Have Different Patterns of Communication

Despite the lack of empirical data, anecdotal feedback and qualitative data from Norwegian CEOs about the addition of women to their boards has been extremely position. Executives are pleased and surprised that women (unlike many of the men) do their homework and read management reports prior to coming to board meetings. In general, they are better at working as part of a team. This may relate to different communication patterns, which have been studied in other contexts. Although there is a lot of individual variability, social psychologists find that women tend to be invested in ensuring everyone has a chance to speak – whereas men tend to be invested in advancing their own position. Women also appear to be more sensitive to divided interests in boardrooms and to ethical issues (also known as fraud).

According to (Mr.) Kjell Erik Oie, the country’s state secretary for equality and children. “There’s no going back. We’ve realised it’s good for business.” Elin Hurveness, founder of Norway’s Professional Board Forum, which helps place women on corporate boards, compares the quota to the smoking ban in public buildings. “At first most people were opposed. With time they coped and acclimated, and now they can’t imagine having it any other way.”

Norway Isn’t Alone

In 2007 Spain passed a law requiring that 40 percent of corporate board members be female. Germany and Netherlands are following a similar course, commencing with voluntary agreement companies can sign committing to improving diversity. At present France is debating a law that would make gender equity quotas on corporate boards mandatory.

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