Crane And Matten Blog
Today we feature a visitor post from our colleague over in regulations college, Aaron A. Dhir, who’s an Associate Professor at Osgoode Hall Law School and a Senior Research Scholar at Yale Law School. Aaron’s reserve on boardroom variety is out next month and it is causing quite a stir.
So we asked him to tell us a little about the problem of diversity quotas on boards and why, regardless of the controversy, his research suggests that it might be a good idea. Having less variety in the governance of business corporations is quickly becoming one of the most talked about topics in corporate and business governance. It offers ignited a heated global controversy, leading policymakers to wrestle with difficult questions that lay at the intersection of market activity and interpersonal identity politics. My new book, Challenging Boardroom Homogeneity, will be released the following month by Cambridge University Press. In this post, I concentrate on quotas.
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While quotas are anathema in america, their existence in Europe is striking. In their most potent form, quotas mandate particular degrees of gender balance in the boardroom. Countries such as Norway, France, Italy, Iceland, Belgium, and (just last month) Germany have all used this path. In Germany, both genders must constitute at least 30 percent of the supervisory planks of specific German companies from 2016. In Norway, non-compliant firms run the chance of court-ordered dissolution. Little is known about the day-to-day operation of corporate quotas around the world. To fill this void inside our knowledge, I interviewed Norwegian corporate directors about their encounters under Norway’s controversial law – the 1st quota on the books.
The participants in my study included women and men, as well as directors appointed before and following the statutory law arrived to effect. A strong most the directors I interviewed supported regulations. The dominating narrative my interviewees conveyed was that quota-induced gender diversity has positively affected boardroom firm and work governance.
Generally, respondents emphasized the range of experiences and perspectives that women bring to the board, as well as the worthiness of women’s independence and outsider status. They stressed women’s greater propensity to engage in more rigorous deliberations also, risk assessment, and monitoring. But if diversification has positive effects on company governance even, the question remains: Why are quotas an appropriate mechanism by which to attain those benefits?
Some commentators impugn the intelligence of quotas, charging that they stigmatize and marginalize their beneficiaries. As one critic had written in The New York Times: “women admitted to boards in order to fulfill a quota are improbable to be seen as equals whose existence at the desk is merited.” These critiques must seriously be studied.
If the recipients of affirmative action feel isolated, or they are regarded as mere tokens, how do such steps possibly be justified? Without question, quotas are an imperfect method of diversifying corporate boardrooms and in the book I explore the limitations of the quota model. Having said that, critics sometimes color an incomplete picture and rarely ground their quarrels in the voices of these who presumably matter the most – those who actually live under quota regimes.
What do they themselves say about quotas’ possibly pernicious effects? My research asks that question exactly. Only a small minority of board members I interviewed felt that female directors were isolated or stigmatized. My female interviewees explained this in different ways. Some highlighted the need for the substantial amount of women required by regulations.