There is no debate that the representation of women in the C-suite is poor. In the US, of the Fortune 500 companies, only 15 have a female CEO. The Economist asks the question, how do we rectify this disproportionate representation?
Europe has taken the regulatory approach; the EU passed legislation that asks companies to reserve 40% of board seats for women by 2020. And a McKinsey study found that European countries with a higher percentage of women in leadership roles also had higher financial returns. So, the motivation to get women in senior management positions is a clear one. If done well, the financial health of a company may very well grow stronger. But the real question is how do we change the gender ratio in an effective manner?
The European quota, though arguably the only real way to force change, has not proven to be successful in the past. Norway required its boards to grow from 9% to 40% female representation from 2003 to 2008, and the results were negative. The corporate value of the companies who raised female representation by more than 10% fell by 18%. The result of the forced, rapid and significant increase was that less-experienced women were given board positions and the bottom line suffered.
The gender gap is an issue without a clear answer bc many of the issues revolve around family planning. Women often take time off to rear children or switch to working part-time. And this is on top of the personality difference – men are more likely to push for higher salaries and ask friends for favors to get ahead.
So although CEOs might find that setting a strict quota is not the route to finding lasting and meaningful female representation in the C-suite, it’s important to work in other ways to foster female employee growth. More female employees in senior management mean higher returns, so it’s in your best interest to continually reevaluate your female representation and see what you can do to improve it.