Gender balancing – quotas or social pressure?

Gender diversity is now one of the hottest topics around the world, with hardly any country unable to ignore the groundswell of pressure to increase the balance of genders at the highest levels in business and in the public sector.  Governments are wrestling with how best to encourage this gender balancing – through incentives, public influence or through legislation (with a time limit, or with penalties, should efforts not be seen to be made).

 In South Africa, we are on the verge of having the Women Empowerment and GenderEquality Bill passed into law.  This legislation will require that women fill 50% of all decision-making positions in companies (which include C-Suite roles).  From an administrative point of view, this shouldn’t pose too many difficulties.  We have had over a decade of BBBEE programmes, so are fully conversant with targets, with preferred procurement policies and with penalties for non-compliance.  Managing these new targets administratively will be fairly easy – they will simply be included into existing scorecards and will form part of reporting, which is already required on an annual basis.  The true challenge will be in implementing these new guidelines.  From the physical point of view of identifying, developing and including countless women into management structures, a total shift in culture is going to be required.

Are quotas the right way to go?

 In Europe, where quotas have been passed by law in many countries since the early 21^st century, feelings have run high and opposition has been fierce.  In Norway, when the government decreed in 2005 that women needed to fill 40% of director level positions by 2008, at least 100 companies de-listed in order not to be bound by these provisions.  The target was not met by 2008, so penalties were introduced, and much better progress was made.  Norway currently leads the world with 42% of company boards being comprised of women.  Whether this would have happened without quotas is unlikely.

Most of European companies are now shining the spotlight on the participation of women at senior levels of business.  France has recently introduced quotas that women need to occupy 40% of board positions by 2017 for all publicly listed companies.  Italy has legislation in place, while countries such as Sweden, Spain and Germany are asking companies to ‘strive’ on a voluntary basis towards achieving greater equity.  The Netherlands has approved a Companies Act amendment that asks companies to work towards a 40% representation of women in decision-making positions at a company’s ‘discretion’.  It will be very interesting to review the progress of these countries down the line to see whether those with quotas do better than those without.  Certainly there is growing public pressure, so it’s unlikely that any country will be able to carry on with ‘business as usual’.

The United Kingdom, a country notorious for its anathema towards social targets, is working hard towards gender balancing, and is resisting introducing quotas.  To this end, many organisations have been formed to propel change.  Great progress has been made by groups such as the 30% Club, which was formed to facilitate greater diversity at decision-making levels.  In 2010, looking at the FTSE100 companies, 12 out of every 100 directors appointed was a woman.  Last year, the appointments of directors in these same companies was 50/50.  At this rate, the UK is on target to achieve its unofficial goal of having 30% representation of women on company boards by 2015.

Social pressure

When a topic becomes this high profile, no country can ignore it, even if quotas aren’t introduced. Australia currently has no targets  – within the ASX200 companies, 15.4% of directors are women.  However, the number as recently as June 2010 was just 8.3%, so there has been an almost 100% improvement in just a few  years.  Why has this happened?  Probably because since January 2011, the Australian Securities Exchange has insisted that all companies adopt and disclose a diversity policy, provide written objectives and report their progress towards improving the diversity of their boards and the proportion of women represented.  Just because quotas aren’t in place doesn’t mean that social pressure isn’t able to get the job done!

In other parts of Asia, Hong Kong, India, Malaysia and many others are all looking at possible quotas and ways to bring women into decision-making roles.  Malaysia began focusing on the staffing of its civil services in 2004 and the number of women present in government agencies increased from 18.8% in 2004 to 32.2% in 2012.

The US and Canada do not yet have formal quotas, but many discussions are taking place.  Legislation was passed in Quebec in 2006 requiring a 50/50 split of genders on boards, and legislation for the whole country is now being proposed.  The US currently has a scorecard of about 16% of women on Fortune 500 company boards – but this is the 7^thconsecutive year of no growth towards gender balancing.  It’s vitally important to bear in mind that women in the US are generally more highly educated than men (a growing world-wide trend), so this low number cannot be because of a lack of skilled candidates available.  Will this situation change without the introduction of incentives or quotas?

The final verdict? The jury is out!

The Vice-President of the EU Commission Viviane Reding  (speaking in a public session with Christine Lagarde, Managing Director of the International Monetary Fund) said:  ”The proof is in the pudding: regulatory pressure works.”   Others argue that social pressure will achieve the same results, with less window-dressing less and resentment from within companies affected.  Either way, a tsunami of gender balancing is gathering and the companies that will succeed into the rest of the 21^st century will be those those that confidently ride the wave and rise high enough to see the enormous benefits that these new developments will bring.