Should there be gender quotas on boards?

Highlights from our joint FBFDiscuss! and Women in Finance debate.

Written by: Naïs Ralaison

On 3 December 2021, the Florence School of Banking and Finance hosted its fourth #FBFDiscuss! online debate and Women in Finance event. The event took place in the format of all #FBFDiscuss! Debates, the audience got polled throughout the event while the discussants presented their arguments in favor or against the motion. Sylvie Goulard (Deputy Governor, Banque of France) was the proponent and Renée Adams (Professor of Finance, Said Business School Oxford University) the opponent to the motion ‘There should be gender quotas on boards’. Elena Carletti (Professor of Finance, Bocconi University) chaired and moderated the debate.

For Sylvie Goulard, speaking in her personal capacity, gender balance is “above all a matter of rule of law and fairness, with equality being enshrined in all our constitutions and law. But it is also about a better use of talents.”. The business case for diversity, with quotas bringing profitability and effective management changes is a well-documented fact for Ms. Goulard quoting the work of Valore D in Italy or the Women in the Workplace report from McKinsey. The achievements quotas could bring therefore represent “a success not only for gender equality, but for the society as a whole”, she added.

Ms. Goulard then proceeded with three reasons to promote quotas:

  1. “The alternative failed”, as illustrated by the picture of the G7 finance ministers and central bank governors on July 2019 at Chantilly. For Sylvie Goulard, current speeches, institutions charters or meeting about diversity are “only bla-bla-bla and we should not have any illusion that what is going on is pink washing”. The problem is the “defensive reaction from the people in charge” to promote change and welcome diversity. Ms. Goulard recalls that currently, in the main decision-making body of the ECB that is the Governing Council, there are only two women (Christine Lagarde and Isabel Schnabel) out of the twenty-five members. It is crucial to increase the diversity in every decision-making rooms, to promote fairness and break the reproduction of a male-dominated leadership (cf. Gender Quotas and the Crisis of the Mediocre Man: Theory and Evidence from Sweden, published in the American Economic Review).
  2. “Quotas are efficient”France passed a law in 2011 to impose 40% of women in boards of large companies and while today none of the CAC-40 companies are led by a woman and only 20% of women are in leadership positions “the landscape is changing dramatically, from 10% of female board members in 2009 to 45% women now in executive boards”.
  3. “I don’t believe that women don’t like quotas”: Sylvie Goulard recalls the “Ich bin eine Quotenfrau” video from Ursula von der Leyen and 40 other women where they state to be proud to have had their jobs through quotas. She adds: “of course, quotas are not sufficient, we also need policies on wages and education to get women into male-dominated fields”. Finally, by promoting gender diversity, we also tend to promote diversity. Ms. Goulard concluded her statement by saying: “if we don’t want to see further white-male-only meetings like this one [the G7 one in Chantilly], then let’s be in favor of quotas!”.

For Renée Adams, based on her own research and expertise, gender inequality is “an urgent social and human rights problem” but quotas are not the way to go and it is “unclear what problem they solve”. She offers four main reasons to not use gender quotas on boards:

  1. “Gender quotas are often proposed to solve problems they cannot possibly solve, such as low shareholder value.” For Prof. Adams, “it is an unfortunate fact that most gender quotas are actually not motivated by concerns about inequalities women face but by economic arguments”. She illustrates this point with the example of the California’s 2018 Gender quota, where the stated rationale behind was to boost California’s economy.
  2. “Gender quotas are often justified on the basis of flawed research and stereotypes about women and men”. Renée Adams adds that the literature suggesting that quotas could fix an economy or improve shareholder value is “both inconclusive and fundamentally missed the point […] that women are not the same, just as men are not all the same. […] so by motivating quotas with economic arguments, I believe policymakers are stereotyping both women and executives as being all the same.”.
  3. “Gender quotas are examples of lazy policymaking. Politicians pass them to avoid having to tackle the actual problems that lead to women’s underrepresentation in leadership”. Prof. Adams highlights that “because the taxpayers do not have to pay for quotas […] all the policymakers have to do is to tell companies to add more women to their board and problem solved!” but “It cannot be that simple. By framing it as being a solution to a simple problem, policymakers are setting women up to fail”.
  4. “Gender quotas place the burden of solving women’s problems on the shoulders of women and specific types of organization, for exampled listed firms, instead of allocating the responsibility across the society”. Quotas can not solve economic problems, and the responsibility should not be on women for Renée Adams: “Quota women have to be role models for the next generation of women and save the companies on whose boards they sit. They also have to save the economies where they work. On top of this, women face daily struggle to survive in the middle of an epidemic of domestic abuse. They struggle to get recognition for their work and to be treated as equals.

To watch the recording of the event, click here.

The summary video and the results of the polls will be published shortly, to keep yourself updated about our next Women in Finance highlights and events subscribe to our newsletter.

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