Viviane Reding is a woman on a mission. She believes Europe’s major companies are run by an old boys’ network that excludes female colleagues from top jobs. And since Reding is the E.U. commissioner for justice, fundamental rights, and citizenship, she is in a position to do something about it. She has proposed a quota for all of the European Union’s publicly listed companies of 40-percent female board members by 2020. Currently, women account for only 12 percent.
The quota has divided the European Union. Most member countries have taken some measures to try to boost the number of female board members. But many feel this is a national matter and not an E.U. concern. In June, the Netherlands and nine other countries submitted a formal letter of objection.
For Commissioner Reding, the quota has been a multiyear crusade. In March 2011, she invited publicly listed companies to sign a voluntary pledge to make sure 30 percent of their board members are women by 2015 and to increase that to 40 percent in 2020. But the pledge wasn’t all that voluntary. She vowed that in a year’s time she would check whether companies were promoting enough women. “If this has happened by March 2012, I will congratulate the European business world. If it has not happened, you can count on my regulatory creativity,” she said.
The companies’ efforts weren’t up to snuff, and so the following year Commissioner Reding began work on a proposal that would financially penalize listed companies whose boards did not have 40-percent women. She was met with fierce opposition, even from some of her fellow female E.U. commissioners, and was forced to abandon that idea. The quota she is currently proposing is essentially toothless. If companies don’t meet the quota, the relevant national government will determine if there should be any repercussions.
One of Commissioner Reding’s main arguments for the quota is that it’s good for business. She points out that companies with mixed-sex boards are more profitable than ones with all-male boards. But there is little evidence to suggest this is a causal relationship. And there is plenty of evidence to suggest that a government-enforced quota would harm businesses.
Norway instituted a 40-percent women quota in 2003. Companies that failed to comply could be forcibly dissolved. The immediate result was that many Norwegian companies chose to delist themselves and duck the quota altogether. Christina Hoff Sommers, an economist with the American Enterprise Institute, studied Norwegian companies that met the quota. She found that compliance had a negative impact on their profitability. Many of the companies had been forced rapidly to promote younger women who lacked sufficient experience. The quota also gave rise to a privileged group of about 70 women who share most of the available board seats among them. They’re nicknamed the “golden skirts” or the “old girls’ network.”
At one point Norwegian executive Mimi Berdal sat on over 90 different boards.
The government of Sweden has expressed its opposition to an E.U. quota. The Swedes are usually at the forefront of “gender-equality” legislation. But they have been watching their neighbor Norway, and they do not like what they see.
Commissioner Reding’s quota is even more problematic than the Norwegian one because it sets the same standard for all E.U. countries. This ignores the massive differences between some of the national economies. Spain’s government enacted quotas in 2007. Since then, the country has sunk deeper and deeper into economic crisis. Unemployment is currently above 25 percent. As companies are fighting to survive, it’s unlikely the Spanish government will punish them for not having enough women on their boards.
Another country that would have trouble meeting the quota is the Netherlands. The Dutch workforce is unique in the developed world in that 75 percent of women who hold jobs work only part-time.
This situation developed as the unintended consequence of government policies. Until the 1970’s, most Dutch women did not work outside the home. As taxes rose, more women began taking part-time jobs—and they never graduated to full-time. Because of the Netherlands’ progressive tax system and a marriage penalty (a woman pays the same tax rate as her higher-earning husband or domestic partner), there was no financial incentive to work more hours.
In the decades that followed, the Dutch economy evolved to accommodate part-time female workers. In many countries, part-time work tends to be menial. But in the Netherlands, women can find specialized, intellectually satisfying part-time jobs. Management functions still tend to be closed to part-timers, so those positions are filled mostly by men. As a result, only five percent of the members of Dutch boards are women, and two thirds of those women are foreign nationals.
I experienced this firsthand while working at the headquarters of a Dutch multinational. I was based in a large, international department. All the Dutch women worked part-time. All the women of other nationalities worked full-time. A couple of middle managers were non-Dutch women. The senior managers were all men. In 2008, the company appointed its first ever female board member.
Yet this company was routinely listed in Dutch business magazines as one of the most “woman friendly” workplaces in the country. That’s because the Dutch define woman friendly as providing flexible working hours and generous maternity leave. Reding, by contrast, defines woman friendly as promoting women into top jobs.
Last year, headhunter Monique de Vos wrote an op-ed in the Dutch newspaper Volks krant about why Dutch women reject full-time jobs. She chalks it up to social norms. Women who are stay-at-home moms or who work part-time—she calls them the “schoolgate mafia”—make women who work full-time feel like they’re bad mothers. Surveys of young Dutch women show that these attitudes are not evolving. In fact, it is not uncommon for young Dutch women without children to take part-time jobs. They devote their extra time to hobbies and meeting friends.
During my time in the Netherlands, I sometimes found myself saying “I work full-time” as an excuse for being late, declining invitations, etc. In the United States, I would never think to declare my working hours. But in the Netherlands, I received nods of understanding and even expressions of sympathy.
Today, the Dutch government identifies women working part-time as one of the biggest challenges facing the national economy. As the population ages, women are viewed as an underutilized source of revenue for the welfare state. In 2001, the government amended the tax code to lift the “marriage penalty.” This did little to improve the situation. It did help bring more housewives into the workforce, but most of them opted for part-time work. Also, some women who already had jobs actually reduced their working hours because they were now earning more money.
Taking a page from Commissioner Reding’s book, the Dutch government has asked publicly listed companies to ensure that 15 percent of their board members are women by 2015. There is no penalty for failure, though. And companies like the one where I worked can simply excuse themselves by touting their high ratings for being “woman friendly.”
Given the extent to which the Dutch national government’s policies have distorted the economy, it is worrying to consider what a one-size-fits-all quota for the entire European Union would do. The potential for negative unintended consequences seems limitless.
Another country opposing the quota is the United Kingdom. This is not surprising since Britons are the European Union’s most reluctant members. Regulations like the women quota will only lead to more resentment and calls to exit the European Union. But even in the United Kingdom, the government has been gently nudging companies to appoint more women to boards. British companies have recently been making some progress on this front.
Given the strong opposition from a large number of E.U. countries, Commissioner Reding’s proposal is unlikely to be enacted. Her crusade, however, has kept the issue high on the agenda for most E.U. countries. One hopes she is wise enough to accept that as a victory.