January 09, 2008
Norway and Gender Diversity in Corporate Boards
Posted by Daniel Sokol

One of the most exciting corporate law changes for 2008 to watch is the transformation of corporate governance in Europe. In particular, ever since the WSJ carried a story last month about gender and corporate governance in Norway, which the Economist followed this past week, I have been very excited for the study of gender and organizational change in corporations. As the WSJ reported, “A 2003 law requires every publicly traded company in Norway to have a certain number of women on its board by Jan. 1 or risk being shut down.” The magic percentage of women directors that Norway wants to see is 40 percent. Similarly, Spain has introduced legislation to increase the number of women directors. Board diversity has been an issue of many academic papers but much of the debate has been focused on normative issues or based on tracking board diversity through a small number of board members. With Norway’s legislation coming into effect, we have an important experiment where we can test a number of hypotheses. My hunch has always been that only marginal increases in board diversity in terms of gender or race would not make a significant difference to a company’s bottom line because any push for organizational change by these new board members would face the same sort of problem that any sort of change faces in large organizations-difficulties in implementation because of firm bureaucracy, path dependence and general firm intransigence to manage change effectively. Here we have a wonderful case study at the country level where more or less overnight the percentage of new directors has changed. I suspect that with significant institutional change, there will be less path dependency for Norwegian companies. A critical mass of new board members may question some of the business as usual assumptions of previous boards. On gender specific issues, perhaps some of these new boards will implement more effective policies for flexible work schedules to keep talented women from exiting the workforce. Over time, we will be able to amass enough data to see if the quality and effectiveness of Norwegian companies’ corporate governance improves and if this change may be due in part to changes in the boardroom. Will Norwegian companies perform better than other European companies? There are potentially interesting policy implications for this development in the United States. I hope that academics track the implications of these changes closely. 

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