Do quotas work?

In an effort to promote diversity at the CEO level, Norway implemented a quota on publicly traded corporations.  In 2003, this mandate went into effect.  At the time, there were 563 firms listed in the stock market.

The government felt that by imposing a forty percent requirement for women’s participation on a company's board of directors, they would prompt the elevation of women into more leadership roles. Instead of promoting diversity, it had the unintended consequence of prompting companies to leave the stock market.  In fact, by 2008, only 179 firms were still listed and, although the percentage of women on their boards was forty percent, only six percent of companies had female CEOs.

This research was conducted by Nina Smith, an economist at Aarhus University in Denmark.  Smith’s conclusions regarding the lack of women in management roles was that Nordic women have generous maternity leave benefits and this results in long absences from the career climb.  Secondly, with high tax rates, domestic help becomes very expensive, so the alternative is for the mother to stay home with her children.

Instead of increasing the percentage of women in the C-Suite, Norway’s law reduced the number of publicly traded companies subject to this requirement. 

Do quotas work?  Not for our female counterparts in Norway. We need to be very careful in what we want our desired outcome to be when talking about diversity.