Gender Board Quotas: Still Unhelpful to Working Women

Vanessa Brown Calder and Anastasia P. Boden

California passed a gender quota law in 2018 that received significant attention. The woman quota was the first of its kind in the U.S. and it required that publicly held companies headquartered in California have a minimum number of female directors, depending on board size. If companies did not comply, they could face fines of $300,000 per unfilled seat.

However, in late 2022, a Los Angeles Superior Court found that the state’s quota violated the equal protection clause of the California Constitution and overturned the law. The court’s decision currently prevents the law from being enforced, but the ruling is being appealed and as a result may be reinstated.

Despite California’s legal troubles with the rule, other states have implemented or proposed similar legislation: For instance, Washington passed a law in 2020 that “requires a public company to maintain a board of directors that is composed of at least 25% which self‐​identify as women” or to provide shareholders with an analysis of board diversity prior to annual meetings. Illinois recently proposed a gender‐ and race‐​based quota, but the legislation stalled after infighting broke out about which minority groups should be included. Iowa has long held a gender quota for all government boards, committees, and commissions.

There are a handful of other states that have considered “true” board quota legislation that directly affects the gender composition of corporate boards[1] as well as states that have instituted weaker board diversity reporting requirements.[2] But international experience indicates both types of proposals are unlikely to help professional women meaningfully: Norway was one of the first countries to pass a gender quota law in 2003, but although “the purpose of quotas was to catalyze a wider change in society,” data from 20 years later demonstrates the law apparently had a mere symbolic effect.

According to research by Nima Sanandaji, various indicators suggest that board quotas did not meaningfully change the trajectory of working women’s careers. As The Economist wrote in 2018, “Ten years on from Norway’s quota for women on corporate boards… gender quotas at board level in Europe have done little to boost corporate performance or to help women lower down.” Another Norwegian study found no evidence gender quotas had an impact on the gender division of managers, and eight years following the quota’s introduction, the Nordic Labour Journal noted that Norway had no female CEOs in its 60 largest firms.

Outcomes for wages and other professional indicators are similarly disappointing. For instance, Norwegian economists investigated whether Norway’s quotas led to higher earnings for women, but they did not find noticeable effects. It seems that Norway’s board quotas benefited a select number of already highly privileged women who hold multiple directorships (called the “golden skirts”) but led to no meaningful changes for working Norwegian women generally.

If California’s law is reinstated, or similar laws adopted by other states, the outcomes are likely to be similarly disappointing. Unfortunately, recent research suggests some adverse effects for California’s now‐​suspended legislation. Although the legislation unsurprisingly increased the proportion of women on corporate boards, support for female board members declined following the legislation. That is particularly disappointing given that women were making tremendous gains before the quota went into effect. Prior to the law’s passage, female representation on the nation’s top 3000 boards had increased for 7 straight quarters in a row.

California’s quota also resulted in statistically large and adverse economic effects. These effects include a negative stock market reaction, a total loss in market value in excess of $60 billion, and high compliance costs, especially for small firms. In Norway, some firms chose to delist rather than comply and suffer any associated economic consequences.

Of course, the entire notion that requiring more women on corporate boards leads to better working conditions or has other trickle‐​down effects is based on stereotypes about women. California’s law explicitly stated that it was based on the notion that women have a certain leadership style, are more likely to comply with corporate laws, carry less corporate debt, and are more risk‐​averse than male board members. During litigation over the quota, the state even suggested that female representation was low because men find other board members at sports games and women are not interested in sports.

The Supreme Court has repeatedly struck down gender‐​based laws that stereotype in this way, even when the measures are intended to help women. For example, it struck down a law that granted women a lower drinking age based on stereotypes about better female behavior. As future Supreme Court Justice Ruth Bader Ginsburg observed in a brief to the Court, the law perpetuated the stereotype of men as society’s active members and “women as men’s quiescent companions.” The Equal Protection Clause mandates that the government treat similarly situated parties equally absent an important reason to discriminate.

If board quota legislation is intended to simply increase nominal women on corporate boards, it is likely to achieve that goal (though female representation was increasing before government intervened). But if the legislation is intended to have more significant or widespread impacts on women’s professional lives, this is as unlikely in 2023 as it was when California’s rule was passed just a few years ago. And in any event, neither is a sufficient justification for state‐​mandated differential treatment. Our Constitution guarantees equality of liberty, not equality of outcome.

More importantly, gender quota laws send the wrong message: that women are unable to get ahead in the workplace without special treatment. This message not only undermines women on corporate boards, but also undercuts the achievements of successful professional women everywhere.