13 February 2014
Bryce Covert
Voluntary efforts from Swedish companies to boost gender diversity on their boards are moving too slowly, so the country may impose a quota requirement if numbers don’t improve this year, a government official said Wednesday.

Women hold 24 percent of the board seats at Swedish companies, according to Statistics Sweden. They also make up just 22 percent of senior managers at the country’s 25 largest firms. At companies that are owned by the government, on the other hand, women make up nearly half of all board members.

The private sector numbers led Finance Minister Anders Borg to warn, “If we see another year of things moving sideways…[the country will] gradually move towards being forced to launch quota legislation.” To avoid that, companies should “much more carefully look at recruitments to boards this spring and at the annual general meetings and we must then see that improvements are being made,” he said.

Sweden’s figures are much higher than many other countries — in the United States, for example, women make up less than 17 percent of board members — but lag behind Norway, which has a quota requirement and where women make up nearly 40 percent of corporate boards. Sweden’s current policies require publicly traded companies to disclose the gender breakdown of their board members and management, and in 2010 it added a policy telling companies to strive for equal gender distribution when determining their boards, both voluntary measures.

Nineteen other countries besides Sweden rely on voluntary efforts to increase gender diversity on their companies’ boards, although some, such as Germany, are moving toward a quota system. Some of these non-binding measures have had an impact: In the United Kingdom, where the government set a 25 percent target for its biggest 100 companies in 2011, the percentage of women on boards has reached 19 percent, the highest point since data was first analyzed and the same amount of growth as the country had experienced during the entire decade prior.

But it may depend on the type of guidance given by each government. In the United States, the only requirement is that companies disclose how they take any kind of diversity into account when picking board members — and most companies don’t even comply. The country hasn’t seen progress on boards in eight years. Canada doesn’t have any requirements except for a quota instituted in Quebec in 2006, and women hold about 13 percent of board seats, which has increased less than 1 percentage point since 2009.

There is also evidence that quota requirements lead to much faster progress. The largest global study of gender diversity on corporate boards last year found that women’s percentage of board seats across the globe has only increased by 1.7 since 2009 — but even so, nearly all of the change has come in Europe, where many countries have quotas. Excluding the continent, women’s share has only risen by eight-tenths of a percentage point. Over half of all the new female directors who joined boards since then have been in European companies. The top four countries for women’s representation on boards are Norway, Sweden, Finland, and France, and three of them have quotas.

However they are prodded to get there, there is plenty of evidence that companies benefit greatly from greater diversity on their boards. In Sweden itself, a 2006 study found that companies with more female board members had higher profits and better potential for increasing earnings that those with no women. Many other studies have come to similar conclusions. Increasing diversity also creates a virtuous cycle in which a company becomes more likely to have greater diversity in the future.