A Case against Quotas

Written by Marilyn Nagel Friday, November 04 2011

A recent article in The Economist explores the ongoing issue of the lack of women on boards in the United States and worldwide and the measures taken to combat it. Diversity and inclusion professionals (and women everywhere) have long been banging their heads against this same wall; the numbers have remained at a virtual standstill for a shocking amount of time.

The article, Women In Business: Still Lonely at the Top, specifically addresses the tactic of implementing quotas to boost numbers. The prime example is that of Norwegian boards, which were 9 percent female in 2003 and were ordered to become 40 percent female within five years. Other European countries have followed suit, prompting some American audiences to wonder if this might also be the solution.

While it’s true that the enforcement of quotas has made a drastic difference, we’re only now beginning to understand the implications of such rapid change: “To obey the law, Norwegian firms promoted many women who were less experienced than the directors they had before,” according to The Economist. “These new hires appear to have done a poor job. A study by Amy Dittmar and Kenneth Ahern of the Ross School of Business at the University of Michigan found that firms that were forced to increase the share of women on their boards by more than ten percentage points saw one measure of corporate value (the ratio of market capitalisation to the replacement value of assets, known as Tobin’s Q) fall by 18 percent.”

In light of this research my perspective is that setting quotas for women on boards is not the answer. As The Economist article suggests, the answer is complex and requires change from boards of directors, corporate executives, and from women.

Widen your Lens – and your Options. The first step is for boards to examine both the job descriptions they create and how they recruit board members. They should not compromise their standards as was done in Norway to comply with quotas, but should look at the requirements of sitting on a board. The common standard is experience as a CEO or, at minimum, C-suite and P&L (profit and loss) experience.

The fact is that a very small percentage of women (or minorities for that matter) are either in the C-suite or CEOs, and many women who are in the C-suite are in fields that are not P&L carrying. This eliminates most women without examining equivalent experience that might enhance the board.

We all understand that diversity is healthy particularly when it comes to innovation and ensuring there isn't “group think.” We also know that the financial crisis was anticipated and raised by a woman, but as a lone voice, she was not listened to. The boards of directors of the failed financial institutions all met the qualifications that are still held as sacrosanct – this would suggest that maybe voices from another discipline or perspective might be healthy.

Wouldn't a woman with top-level executive experience be as qualified to see financial gaps even if she did not carry P&L experience? For example, a chief human resources officer doesn't carry P&L yet has to be closely partnered with the CFO to run a company, develop policy on salary, stock options, and benefits. When we rule out anyone without P&L, we are losing great talents, many of them women.

Leaders of the Future. Corporate executives need to look within their ranks and at their bench strength to see if they are leaders for today or are leaders of the future. Leaders of the future have a different skill set and are inclusive of many of the characteristics traditionally attributed to women. Then corporate leadership teams need to sponsor – to use Sylvia Ann Hewitt's model – and ensure that talented women are put in positions where they can have greater exposure.

Invest in yourself. Women need to find sponsors, evaluate their network to see if it will help them achieve their career goals, and take advantage of board development programs. Programs like the Watermark Institute Board Access Program can connect them with opportunities to serve on boards. Women need to invest in themselves the way they invest in those who are still climbing the corporate ladder.

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Marilyn Nagel joined Watermark as CEO in 2011, leading strategic initiatives designed to help exceptional women in the San Francisco Bay Area enhance their personal and professional impact. Watermark is a member of the InterOrganizationNetwork (ION). Both ION and Watermark advocate the advancement of women to positions of power in the business world, especially to boards of directors and executive suites.

As CEO of Watermark, Nagel leverages her passion for gender diversity by promoting inclusive, diverse, and well-balanced workplaces.

Prior to joining Watermark, Nagel was Chief Diversity Officer (inclusion and diversity (I&D)) at Cisco, where she led the global I&D team on projects that require large-scale change management, talent planning, and learning. As Cisco’s chief diversity officer, her responsibilities included facilitating the global I&D council, which set the I&D agenda and strategy for the company and measured progress toward I&D goals. Nagel also developed the strategic plan for I&D cross-functional teams. She continually looked for ways to help Cisco stay innovative by driving policy changes to create a more inclusive environment.

She serves on the board of directors of Professional Business Women of California, National Action Council for Minorities in Engineering Inc., and Watermark, and she has been a co-chair of the Hidden Brain Drain Task Force at the Center for Work-Life Policy.