Gender Diversity in the Board Room & Its Impacts:
Is the Example of Norway a Way Forward?
The proposal to make mandatory that public companies in Norway have at least 40 per cent of each gender on their boards has an interesting legislative history. The minister in charge voiced the proposal in a tabloid, apparently without consulting anybody else in the government. This was a carefully planned strategy as the minister feared that putting the proposal through the normal channels first would be equal to its quiet death, smothered by corporate lobby forces and bureaucracy sceptical to such drastic measures.
The strategy worked, and the new rule entered into force in January 2006. Although a gender-neutral rule, male dominance on boards of public companies meant that a large number of women directors had to be recruited within a two year period. In spite of strong protests, at the end all Norwegian public companies complied. This was the second two year period that the companies had to respond: Had Norwegian companies on average achieved 40 per cent of each gender by 2005, the rule would not have come into force.
This paper starts by presenting the Norwegian rule, its background as a corporate governance initiative rather than a gender equality one, its innovative legislative approach and the compliance by Norwegian companies. In part 2, the paper discusses the corporate governance significance of gender diversity, drawing on empirical studies of the effect on the performance of the companies. This may be especially relevant for the discussion that the Norwegian rule has inspired in many jurisdictions around the world. Third and equally relevant, the paper discusses the potentially broader impact of gender diversity in the boardroom. Can gender diversity in the boardroom help companies create sustainable value within the planetary boundaries and while respecting the interests of all parties involved?