How to deal with board gender quotas
And how not to
The Economist article, “How to deal with board gender quotas,” quoted Russell Reynolds Associates Consultant Laura Sanderson on how boards should approach gender quotas. The article is excerpted below.
“It’s like smoking; ultimately only a hard intervention made people change,” says Jochem Overbosch, an executive recruiter in Amsterdam. As with bans on lighting up indoors, he says, so too with mandatory quotas for women on company boards, which the Dutch Parliament voted for this month after softer targets failed to move the needle much. Employers say they approve. Assuming all goes to plan, the Netherlands will join seven European countries (and California) in replacing the carrot of “please” with the stick of “or else” to increase gender diversity.
Best practice is a work in progress, but some dos and don’ts are becoming clear. Formalising selection processes to avoid a shortlist of chairman’s chums, for example by hiring an external search firm, as most British firms but only two-fifths of those in America do, is a good idea; it helps avoid inadvertent double standards. So is broadening selection criteria away from a multitude of narrow ones, such as years of executive experience or industry expertise. Ensuring that more than one woman makes it onto the shortlist also helps; research has shown that a lonely shortlisted woman (or representative of a minority) has little chance of getting the job.
Firms should avoid seeking a “pink unicorn” who ticks all conceivable boxes, recommends Laura Sanderson of Russell Reynolds, an executive-search firm. Spreading the desired skills over a number of future appointments makes it easier to find female candidates with at least some of them (or male ones, for that matter). Short, fixed terms for board members make renewal easier. This helps explain why in Britain, which has espoused them, boards are 30% female whereas in America, which has not, progress has flagged, despite corporate professions of gender equality.
And signals matter, not least to ESG investors, who care about rms’ environmental, social and governance performance as well as their bottom-line. Helpfully, gender diversity on boards is easier to pin down than most ESG metrics. It is becoming ever harder to skirt.
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