These Companies Were Required To Hire More Women Board Members And Are Now Reaping The Benefits


Norway’s 40 percent gender quota for the boards of public companies has not just increased the number of women on boards, but the quality of the female candidates, according to a new study from NBER by Marianne Bertrand, Sandra E. Black, and Sissel Jensen.

In 2003, Norway passed a law that requires public companies to make sure 40 percent of their board seats are filled by women. As the study’s authors point out, “Opponents of the reform claimed there were not enough qualified women in Norway to fill the reserved board seats.” In other words, they argued that there was a pipeline problem and the strict requirement would mean appointing unqualified women.

That didn’t pan out. “We show that these concerns were not relevant in practice,” the authors write. The qualifications of female board members increased after reform and look far more like those of the male members.

In particular, they became better educated on the whole. Men’s educational achievement didn’t change much after the quota was implemented, but women’s did, as on average female board members had completed about an extra half year of education. The gap between men and women with business degrees “essentially disappeared” after the quota. “[T]his suggests that women in the boardrooms post-reform have skills that are closer to those of the men with whom they work,” the authors write. “These patterns appear inconsistent with firm claims that they would be forced to appoint unqualified females to boards.” In fact, it seems they were able to find even more qualified women.

This may be because the women were recruited from better pools of candidates. There was an eight percentage point increase in the share of women who came from top positions in their companies, while for men there was only a three percentage point increase. And the share of women with spouses on a board of directors fell from 12 percent to just seven percent, which “suggests the possibility that firms went beyond their traditional networks when trying to fill their quota,” the authors note.

The change came with another bonus for women that may also reflect their higher qualifications: The gender gap in earnings fell after the institution of the quota, from a 38 percent gap to between 32 and 28 percent afterward, depending on which firms you look at. This means “boards became more equal not just based on the number of men and women sitting at the table, but also in the ‘caliber’ of these individuals,” they write, given that more qualified candidates can command better pay. Another plus for the women themselves: Post-reform, there is a growing share of female board-members who have kids, up from 75 percent beforehand (compared to 87 percent of men) to 83 percent afterward (compared to 90 percent of men).

The quota also seems to have had a positive impact on the share of women in the C-suite. While the researchers couldn’t look at exactly who was in the top executive roles, they looked at the gender distribution of the top five highest earners at these companies. They found that “a higher share of female directors may increase the chance that a female employee…or a female employee with children…is one of the top five earners.” Becoming a board member of one of these companies also increased the likelihood that a woman would end up among its top executives.

But the researchers didn’t find any improvements further down the chain of command. It didn’t improve women’s representation among all other earners. The gender wage gaps for all other female workers didn’t improve either, nor did their work environments.

The improved gender parity did likely increase companies’ bottom lines, however. Numerous studies have found that companies with better gender balance at the top perform significantly better than those with all or mostly men.

Since Norway enacted its quota, Finland, France, Iceland, Italy, the Netherlands, and Spain have all passed similar laws. Germany is also likely to institute one, while government officials in Sweden have said they’ll impose one if gender numbers don’t improve. The European Union as a whole may also soon see one. The United Kingdom has a 25 percent female target.

In the United States, where women have made up less than 17 percent of board seats for eight years, there is no requirement or goal. The only rule we have is a requirement to disclose how companies consider diversity in selecting their boards, which most companies don’t comply with anyway.