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Business leaders see gender quotas as ‘necessary evil’ to improve boardroom diversity

Published 10 May 2021 in Strategy • 3 min read

The controversial policies are an imperfect solution to the glacial pace of progress on tackling gender inequality in senior leadership positions.

The introduction of mandatory gender quotas for women on company boards would help to speed up the glacial pace of progress on tackling gender inequality in senior leadership positions, according to a group of chief executives, specialist head-hunters, board members and leadership professors.

Speaking at the St. Gallen Symposium, they called for an acceleration of a global drive to force companies to ditch “stale, male and pale” leadership teams. The calls come as governments such as Switzerland and Germany, as well as the US state of California, start mandating gender quotas.

Quotas are highly controversial, however, with critics deriding them as “box-ticking exercises” that do little to address the “glass ceiling” that holds women back from reaching the upper echelons of management. 

Jean-François Manzoni, the President of IMD, said: “One way to look at quotas is as a necessary evil. It is certainly not a sufficient mechanism, but it does help to force the system to override existing stereotypes and unconscious biases. It is a way of ‘priming the pump’.”

He added: “In time, increased diversity will become self-reinforcing as we all learn to appreciate its benefits, to overcome our prejudices and to develop a more inclusive mindset. But the process needs to be kick-started, and empirical evidence over the last two decades unambiguously shows that, without quotas, the speed of progression is simply too slow.”

Simone Menne, who serves as a board member and non-executive director at several companies including BMW and Deutsche Post DHL, agreed that gender quotas were needed for a period of time, but she pointed to problems of potential tokenism and insisted the best people should be hired for the job.

Carla Kaufmann, Partner at GetDiversity, an executive search company, and companymarket.ch, a business broker, said that quotas on their own were not sufficient to address inequalities. She said they would do little to tackle the “leaky pipeline” of women disappearing from the career ladder, urging companies to promote more women to the top jobs. In March, SquareWell, the shareholder advisory company, found only one in 10 recently appointed CEOs or Executive Chairs of large companies is female. In total, only 5% of top jobs at big companies are held by women.

“What can you change to get an environment where women…have [a] better environment to develop themselves, and they want to go to the top and they’re not squeezed out on the way [to] the top?” she asked. “For a long time I was against [quotas], but it’s a number that gives us an insight [into] the culture. That’s a number we need in order to understand where we can make changes.”

Alain Dehaze, CEO of The Adecco Group, the world’s largest workforce solutions company, said that he was “philosophically against” quotas but he recognized their importance 

Companies are coming under pressure from their investors, employees, regulators and society more broadly to diversify their leadership ranks to attract and retain top talent and improve the potential for innovation.  

The panel saw diversity as a business imperative, citing research by McKinsey showing that companies in the top quartile for gender diversity are 21 percent more likely to have above-average profitability than more homogenous organizations. “Diversity is not a luxury; it is mandatory to survive as a company,” Kaufmann said, while Menne added that a wider range of perspectives improves decision-making and problem-solving.

“We have a very complex world with a multitude of problems and challenges…And to solve a complex issue, you need multiplicity, you need to look at several parts of this complex environment to find the right solution and make the right decision. 

She also noted that diversity was coming up frequently in boardroom discussions, but she urged business leaders to turn their warm words into action: “There is still a lot to do despite lots of discussions and good arguments,” she said, adding that “we have to overcome this cultural part and work a lot on unconscious bias and overcome stereotypes before something changes” 

Kaufmann reported success with gender-blind resume screening to mitigate unconscious bias: “Unless you understand diversity, it causes stress, so you have to explain, you have to do this inclusion work. We do that by blinding the profiles during the process.”

The panel also reflected on using gender-neutral language in job descriptions, which they argued produced mixed results. Menne said: “I personally have my doubts that this will help. In general we have to think about a good language to not exclude people, minorities, but you cannot force a language to include everybody because then you end up with a very strange, artificial language that will not work in my opinion.”

IMD is partner of the St. Gallen Symposium

 

Expert

Jean-François Manzoni

Jean-François Manzoni

President of IMD, where he also serves as the Nestlé Professor

His research, teaching, and consulting activities are focused on leadership, the development of high-performance organizations and corporate governance.

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