Esoteric Dissertations from a One-Track Mind

January 24, 2008

Norway Tries to Smash the Glass Ceiling

Filed under: economy, politics — Tags: , , — codesmithy @ 11:54 am

The BBC has an article about a policy Norway adopted to mandate 40% of their executive boards be female for publicly traded companies. The deadline came on the first of the year, although the original legislation was put into effect 5 years ago. This caused the hiring of almost 1,000 women in intervening 4 years. The Liberty Papers tries to explain why this is a bad thing.

The first thing that I have to contend with in the Liberty Papers article is the somewhat revisionist proclamation that “America lets the market sort this out, and women hold more top-level positions than other industrialized nations.” If that were the case, why does America have numerous federal laws such as the Civil Rights Act of 1964 which protects an individual from discrimination on the basis of sex and an Equal Employment Opportunity Commission which enforces those laws? Looking at the EEOC’s website, it is clear they do work on thousands of sexual discrimination cases each year. Is the 15% members of the board at Fortune 500 companies a result of purely market forces, or did the EEOC, a strong feminist movement, and a sympathetic judiciary play a role?

Secondly, Norway is now more than double America’s Fortune 500 percentage. This is after 5 years the law went into effect, as opposed to over the last 30 in America. I have no delusions that if a similar law is not enacted in the United States, we would still be woefully behind where Norway is at now, 10 years in the future as well.

Third, a publicly listed company is a legal status, not an inalienable right. Free market fundamentalists tend to forget that in a true free market, there is no need for limited liability corporations. The government issues the corporate charter and can set whatever criteria it chooses. It was exactly this legal standing that Norway threatened to attack, and publicly traded companies quickly fell into line. There are notable exceptions where business owners decided to go private or stay private rather than go to the trouble of finding qualified women to fill their board positions. It could be a harsh reality of resource constraints on the business, or just straight bigotry. I wouldn’t call it an unintended consequence, but rather a predictable one whenever one tries to change society for the better; there will always be those slow to adapt or unwilling to change.

Third, it is hard to find the economic harm, the prediction free market fundamentalists make when governments embark on these missions of interference. We can look at the economist.com country briefings for the United States and Norway. Norway matches the United States in Real GDP growth, while maintaining a positive current account balance, meaning it is growing in a sustainable fashion, as opposed to United States growth which was financed via foreign investment. To give a magnitude of the disparity between the economic outlook between the two countries, according to the CIA world factbook, Norway is 8th with a current account balance at $55 billion and the United States is last with at $-747 billion.

How bad is that current account balance for the United States? Let’s just say if you sum up the other 100 countries that have negative account balances, their total negative account balance is less negative than ours (although we might be counting Cyprus twice, it is a problem in the Factbook) by about $50 billion.

Here is what we know. One, women can make great executives and leaders, Queen Elizabeth being one very notable example. Although, there are more mundane examples in contemporary business. Second, given the percentages in the population versus board membership, there is an obvious gap in female participation. The reason for the gap is multi-layered based on historical bias, attitudes and expectations in the society, lack of social networking for women, etc, at which point Norway has a chicken and egg problem with trying to achieve a more equatable society in terms of gender. In the face of this, they set an aggressive executive goal by simply stipulating what a reasonable end state would be and let businesses take initiative on actually solving the problem. This has a few predictable drawbacks, but unless there are actual structural constraints that remain unaddressed, the majority of problems should work themselves out as more qualified female candidates see the opportunities afforded to them.

Norway did this without ruining their economy. It took a mere 5 year and afforded over 1,000 women an opportunity they might otherwise have had. If Ms. Hoel is to believed, some of the benefits of having a larger pool of potential candidates are already improving the quality of the executive boards. While I would agree it is too early to tell the ultimate success of the project, it is showing promise. There are drawbacks, but there are signs that benefits are outweighing the costs. It is just a matter of if and when the female candidate pool expands and whether the stragglers become a permanent fixture of the economy. I highly suspect the stragglers will disappear and the candidate pool will expand relatively quickly (within the next decade or two).

If I were a woman, this method would certainly seem to beat the “market” approach, as it seems dubious to what extent the “market” has ever played in bringing about economic equality.

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