Tuesday, July 27, 2021
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India’s gender quota for boards of directors led to a troubling trend

Good morning, Broadsheet readers! Janet Yellen weighs in on stimulus checks, the WNBA outpaces all other U.S. sports leagues on diversity, and we dive into new data on board quotas. Have a great Tuesday.

– On the sidelines. Gender quotas for boards of directors are one tool commonly employed in the pursuit of gender diversity. Norway started the movement in 2003 with a 40% female quota for corporate boards, and since then countries like Spain, Israel, Kenya, Portugal, and Germany have followed suit with their own quotas. California in 2020 became the first U.S. state to enact a threshold for female representation in the boardroom.

With each new law come the same questions: Will the women who fill the earmarked seats be qualified for their roles or will they be ‘token’ appointments? Will the same women be picked for board positions over and over again, undercutting the effort to foster diversity of thought?

Those questions cropped up when India introduced its quota—at least one woman per board—in 2013, and new research published in the Harvard Business Review says the outcome avoided those worst-case scenarios.

When India’s law went into effect, 61% of India’s 500 largest firms (by market cap) had no female directors. Four years later, 83% of non-compliant companies had added a female director; another 14% had added two or more women. And researchers from Northeastern University and Aarhus University in Denmark found that unlike in Norway, where multiple directorships initially went to a small group of prominent women, board seats in India were better distributed. What’s more, the researchers found that 70% of women appointed to all-male boards were ‘independent’ or not female executives of the company or related to the controlling owner.

Alongside these positive findings, the researchers discovered a troubling trend: Even though the newly-appointed female directors were more educated and likely to have more political experience than their male peers, they were less likely to be appointed to key board committees, even when the researchers controlled for previous board experience.

“By sidelining new independent female board members from the more influential board committees, predominantly male boards were able to limit the extent of actual governance reform in their internal board processes,” the study says.

It’s a reminder that for diversity efforts to achieve their purpose, they need to add new voices to decision-making processes, going beyond how well a board or executive team or workplace complies with an initiative on the surface.

Claire Zillman
[email protected]

Today’s Broadsheet was curated by Emma Hinchliffe

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