Awareness about the benefits of having more female representation on corporate boards seems to have hit an all time high, yet increases in numbers have been slow and have currently reached an impasse. When we talk about board diversity, the solutions given are in the form of either ‘targets’ or ‘quotas’. In this Idea, both are examined to show why quotas may not work as intended, and how targets instead can be designed to achieve the desired benefits of gender diversity.
In 2010, the Australian Securities Exchange (ASX) changed its reporting requirements, calling for listed companies to detail their progress against voluntary gender diversity targets. This move on the part of the ASX is demonstrative of the increased global awareness of utilizing female employees, and how costly it can be for nations as well as organizations if they are not. But despite such moves around the world, the percentage of female board directors remains at around 9-10% in most countries. Moreover, this figure seems to have peaked, with stagnant or no increases. This has prompted researchers to look at existing efforts to increase diversity in organizations, and consider whether these strategies need to be revised.
Targets and quotas have been two types of strategy commonly applied in bids to boost gender diversity; for example, Norway introduced the 40:40:20 rule for corporate boards in 2003 (i.e. at least 40% of each gender and the remaining 20% of either gender). Similarly, a 2011 resolution passed by the European Parliament requires quotas to apply in all EU nations, with female board representation to be at 30% by 2015, and at 40% by 2020.
At the same time, quotas draw strong criticism from those who believe they undermine the principle of merit; a less competent woman may be chosen over a more competent man, simply because a quota needs to be met. Targets, on the other hand, are more of a voluntary, aspirational goal for levels of gender representation in an organization.
According to Melbourne Business School’s Jennifer Whelan – Research Fellow at the Asia Pacific Social Impact Leadership Centre – and Professor Robert Wood, it is clear that the use of both targets and quotas evoke negative reactions. They point to various studies that found that women hired under affirmative action practices are in general seen as less competent and less deserving of their position, even by the women themselves. This may be the key reason why despite the existence of targets in many organizations, they have failed to produce a significant increase in gender diversity as managers do not inherently accept them and are not committed to their implementation.
As such, the case for mandated quotas is a weak one, given their cost, the negative cultural and psychological implications, and the ambiguous evidence of their benefits. Voluntary targets on the other hand could be better designed and implemented to greatly improve their potential effectiveness. Targets are already heavily utilized and highly effective in other areas of managerial work. Assigned gender targets for which managers are held accountable and, where appropriate, rewarded for achievement, could be similarly effective for diversity.
Organizations should develop innovative strategies to achieve effective gender targets and help gain their acceptance. In addition, these targets should be treated no differently to other types of assigned targets that already exist in most organizations.
Whelan and Wood also recommend giving clear feedback on any progress on diversity that an organization makes; for example, publish data on company websites on the proportions of women in leadership roles, annual changes in proportions, major initiatives to increase females, etc.
In a 2013 article in The Conversation, Whelan makes the point that the benefit of boardroom diversity lies not in the ‘feminization’ of board functioning; the advantage is the fuller utilization of human talent and the return on the social investment of education and developing women in the first place. This, she says, is the message researchers and proponents of gender diversity should be promoting.
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