Locked out of the boardroom

When new rules mandating seats for women on corporate boards go into effect in Europe next year, on which side will you be sitting? There are two camps. Proponents of quotas or other vigorous methods of moving the needle quicker cite the now-numerous studies showing that companies with high numbers of female directors are substantially higher than companies with very few or no female directors on metrics such as return on equity, return on sales, and return on invested capital (e.g. the Catalyst 2007 study). These same companies also tend to have more women in top management and also a longer history of experience with spotting and grooming female talent. The other camp argues that imposing quotas destroys value. Observing short-term downward movement in share prices after women directors are appointed, the core argument is that financial markets reward operational experience and discount the lack thereof. Studies show that, on average, women appointed to boards after quota laws are passed tend to have less experience as a CEO or owner than men board members; they are more likely to come from professional (e.g. law, accounting) or political backgrounds. See full Article.