Numerous countries have introduced legislation to improve the gender diversity of company boards in recent years.  New research from City, University of London’s Business School, explores whether these moves have been effective in improving diversity compared to those where improvements are merely advised.

“Boardroom diversity is crucial to the success and sustainability of an organization,” the researchers say. “There is a risk that the current pandemic crisis could see countries that do not enforce quotas on gender diversity take a large backwards step in terms of female representation in the boardroom.”

The researchers analyzed the boards of British, Italian, and French companies across a 14-year period.  Each of the countries have their own laws regarding gender quotas.

For instance, in the UK, a voluntary target of at least 25% of FTSE 100 board seats being held by women was established by the Davies Report in 2011, with this target upgraded to 33% in 2015.  By contrast, France has gender quotas baked into the legislature, with both listed and non-listed firms of over 500 employees expected to have at least 40% of their board seats filled by women.  Failure to comply results in appointments being voided.

In Italy, quotas became law in 2012, with boards required to have 20% of their positions filled by women when they first renewed, and 33% by their second renewal.  Unlike the French, failure to comply, Italian miscreants are culpable to a substantial fine.

Effecting change

The study found that the introduction of regulation was generally the biggest catalyst for change in the number of women in board positions.  There was a significantly larger increase in France and Italy than in the UK, with its voluntary measures failing to deliver the same level of change as seen in the other two countries.

Were these more diverse boards higher quality?  The data suggests that was indeed the case in a number of instances, with certainly no deterioration in quality across the board.

“Our study demonstrates that businesses are more compliant with gender diversity regulation if it is enforced,” the researchers conclude.  “In addition to this, we find no evidence to suggest that the quality of boardrooms, normally associated with effective monitoring, deteriorates under this mandatory regulation. Despite this, gender quota regulations have not yet had an overall positive impact on the appointment of female executives or board chairs, which remains a great challenge and an obstacle to gender equality.”