The Case for Quotas

The ring of the word “quota” can make people push back from the table without waiting for the reasons.  On the matter of women on boards, the reasoning is worth hearing and the stakes important enough to merit keeping your seat.

In a democracy, quotas are unwarranted unless two conditions are met: there must be a compelling public interest in forcing a social change and there must be sufficient resistance that change is unlikely by other means.

An impressive body of studies from authoritative institutions has shown, using a variety of methods and across diverse cases, that the presence of women on corporate boards improves profitability and reduces risk, while raising the standard of governance and furthering both accountability and transparency.

Demonstrating by example the level of resistance that puts quotas in play, British business has fought recent EU proposals, including one for quotas, intended to even the slate. In the process, a great deal of obfuscating rhetoric has covered the facts of the situation.

The FTSE250 has loudly proclaimed that it has already achieved massive strides toward integrating its boards.  The progress of the FTSE is debatable, but the standard achieved by British business as a whole is not:  Britain’s record not only lags behind states like Canada and the United States, but also behind countries like Egypt and Turkey, the Philippines and South Africa—societies we might expect to have poorer performances on this measure.

Furthermore, the line-up of countries that the UK engaged to resist Viviane Reding’s call for quotas has an even more dismal record. For the most part, these were eastern and southern European nations with a distinctive profile:  they have educated women well beyond men, but have closed career paths by clinging to outdated gender norms.  As a result, these countries experience low labor force participation rates by females and fertility rates well below replacement.  They are looking down the muzzle of disaster:  with a further propensity to out-migration, these states will not be able to support their aging populations in the very near future.  This particular set of nations needs to learn—very quickly—to retain their women workers, reward and promote them. This is one of the aims of the proposed legislation—and Britain did not help the situation by enlisting these countries in a self-destructive mission.

Though the UK’s record is better than these companions when it comes to employing and promoting women, it is not a past to be proud of.  World Economic Forum data show that British women are inexorably squeezed out of the management ranks at each progressive level—and pay discrimination, illegal for nearly fifty years, is so rife it is measurable in the aggregate. The UK’s equality laws, until recently virtually toothless and unenforceable, have failed to produce equal opportunity for women or minorities in British management.

The spectre of quotas nearly always raises fears of less qualified people being appointed to positions.  Those agitating against the EU efforts to improve female representation on boards have made good use of this typical response.  But such arguments presume that current appointments are made in a fair and open manner in which the best candidate is evaluated rigorously and transparently before winning.  And, often, that is not what happens in the appointment of board members.  Instead, seats are normally appointed through a secret process and selections are often very clearly the result of cronyism.  It is not just that white male faces appear on every board, but often that the same white male faces appear.  This kind of closed-shop approach begs for an aggressive effort to open up a fair and transparent process so that diversity can be achieved.

Though British women are educated at higher levels than men, they are hired into businesses at lower rates, then pushed out, in a pattern that defies any argument based on individual cases and choices.  Spokespeople for the UK corporations bemoan the paucity of “boardable” women, yet the fault is only their own.  And, the business schools as well as other civil society organizations have already identified a massive pool of ready candidates. Qualification is not the issue. Cronyism and prejudice should be our concerns.

In the aftermath of the scandals of 2008, the public is rightfully suspicious of closed, elite managements. They are keen to see better governance, reduced risk, and diverse slates.  An EU polls shows that nearly 90% of its citizens are in support of this measure.  Yet the UK continued to resist.

The argument is that British business is already making good progress and should be allowed to govern itself.  Yet the statistics actually show a broadscale failure, over nearly half a century, to achieve diversity up through the ranks of corporations.  We must weigh the rights of corporations to govern themselves against the rights of women and minorities to equal opportunity—and the rights of citizens to a transparent and well-governed economy.

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