Women on the board - threat of quotas makes the debate pick up pace

“Gender war in Statoil” read a recent headline in a Russian newspaper. Even abroad, attention is brought to the heated debate which has erupted in the Nordic countries on female representation in board membership and management of companies.

When Statoil, the largest company in Scandinavia, moved to appoint their new management, past experience in the oil industry was not the only requirement to be considered. Even a candidate’s gender has become a factor that must be taken into account. Ironically, it was seen as a victory in the struggle for equality that a man, Mr Jannik Lindbæk, was selected as Chairman of the Board for the Norwegian oil company. Had a woman been chosen, the male representation on the board would have fallen below 40 %, the minimum target level of representation for either sex. All state-owned enterprises in Norway are required to reach this level by January 2004, while major limited companies have been allowed a later deadline of July 2005.

“Seeing that Statoil has now appointed a man to the position of Chairman of the Board, the Chief Executive ought to be a woman,” said Ms Sylvia Brustad, spokesperson of the Norwegian Labour Party on matters relating to the oil and energy industries.

This statement launched a debate in which the Norwegian Minister for Oil and Energy, Mr Einar Steensnæs, supported Ms Brustad in saying that this was the ideal solution, while representatives of Statoil’s shareholders stressed the importance of selecting the right person for the job.

“Gender is not a relevant criterion for qualification” said Mr Tore Lindholt, director of the Norwegian pension fund Folketrygdfondet (National Insurance Fund). The debate on women’s representation in board membership and management of companies has been intensive in Norway and Sweden, with both countries planning to introduce legislation which will impose changes by means of quotas.

Heading the wrong way

Even though the debate is animated, progress is heading the wrong way in several areas. In 2001, ten companies listed on the Swedish stock exchange had a female managing director. Since then, the number has fallen. This year alone, four women have left. Out of 70 listed companies that have replaced their MD during 2003, none selected a woman for the position. Today, three listed companies in Sweden are managed by women.

A recent detailed study prepared by the Swedish Ministry of Industry and Commerce, “Changes in Male Dominance” (SOU 2003:16) analyses 500 companies with more than 200 employees, in the private sector as well as state and local government. Out of these, 87 % had boards dominated by men, i.e. more than 60 % of board members were male. For private companies only, 93 % were dominated by males. 42 % of the 500 companies had no females on the board at all. In those companies where women were present on the board, they tended to represent the trade unions. As a rule, female directors were in charge of personnel.

“There is a widespread expectation that the male dominance seen in the higher echelons of business management may come to an end in step with the introduction of a younger generation into trade and industry,” according to Sophie Linghag, one of the study’s authors who has investigated this issue.

The difference, however, is not as impressive as many tend to believe. Even among companies with executives less than 35 years old, the distribution of gender is far from equal – in the private sector, 25 % of young executives are women, while 75 % are men. Looking at the private sector as a whole, the distribution is 19 % female, 81 % male.

Threat of gender quotas

In both Sweden and Norway, the governments are now threatening companies through proposals for gender quotas in board representation. The Norwegian Parliament has already voted in support of a proposal setting a 1st July 2005 deadline for all major limited companies to include at least 40 % of either sex on the board of directors. For boards with fewer directors, demands are more specific: If the board is composed of e.g. four or five directors, there must be at least two members of either sex. If this goal is reached voluntarily, there will be no actual legislation in Norway. Otherwise, an act will be introduced in August 2005 at the earliest. With the two-year transitional period customary in Norwegian legislation, this act will take effect in mid-2007.

In Sweden, the government has opted for a more modest participation in their proposal. Here, each gender is entitled to at least 25 percent representation on the board. The time limit, however, is tighter – it is due to expire as early as 2004. What may prove a problem is the fact that a law on quota systems is against EU legislation. Sweden has already been reproached when the government wished to reserve 30 new professorships for women in order to improve the distribution of genders at the country’s universities.

In Norway, a recent university decree made it possible to reserve certain services for the lowest represented gender. This case, too, sparked a reaction from the EU surveillance authority ESA which monitors EEA-members’ compliance with EU rules for the labour market.

“There is some tolerance in EU legislation with regard to preferential treatment within the public sector, but even so, this tolerance is very limited,” says Ola Wiklund, Senior Lecturer in Law at Stockholm University.

“What really counts is an individual examination of all candidates during the final employment process.”

In the other Nordic countries, there is less enthusiasm for quotas as a political instrument. This is particularly true of Denmark; between 1978 and 2000, this was the only Nordic and EU country where employers were forced by law to apply for an exemption, each time they wished to make an appointment giving preferential treatment to either gender. The Swedish study on gender distribution, led by Anna Wahl at the College of Business Administration and Economics in Stockholm, nevertheless sums up the development with some cautious optimism:

“There are signs that a certain change towards a more equal gender distribution of executive positions may have been taking place since 1993. This change is not dramatic but rather modest. Yet, while one third of companies considered the lack of gender balance within management a problem ten years ago, half the companies express that attitude today.”