Experts Mixed on Whether Quotas Boost Women in Business

Sandberg named to Facebook board, but experts differ on whether promoting women should be mandatory.

Sheryl Sandberg, Facebook's chief operating officer
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This week Facebook announced that it is adding a woman to its board—the company COO, Sheryl Sandberg. The decision comes at a time when the question of whether women can "have it all" looms large in the national conversation.

But even if Sandberg has it all—and she certainly seems to, famously claiming to leave the office at 5:30 p.m. every day to be with her children—American businesswomen do not. Women lead only 18 of the Fortune 500 companies, and according to research firm Catalyst, held only 16 percent of board seats at those companies as of 2011. To get more women into the boardroom, there may be a straightforward solution: make it mandatory.

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"We had to have Title IX in order to force something to happen for girls [in the arena of education and sports]. So my thought process is, we're probably going to have to have quotas," says Gail Romero, CEO of MBA Women International, an organization that works to empower women in business.

Earlier this year, the EU announced the start of a three-month public consultation on solving the gender imbalance on its boards, and instituting quotas is one option on the table. Norway in 2003 established a 40 percent quota for women on its boards, and countries like France, Italy, and Belgium have instituted their own quotas.

Does it work? Legal action of course gets women into the boardroom, and some research shows that firms with more women in leadership positions simply are more profitable. According to a 2011 study by Catalyst, Fortune 500 companies in the top quartile of women's board of directors representation saw higher returns on sales and returns on investment capital than companies in the bottom quartile. And a 2011 study from McKinsey & Company and the Wall Street Journal showed that companies with three or more women in top positions scored better on McKinsey's Organizational Health Index.

The research is not entirely conclusive, however. One 2009 University of Michigan study shows that the performance of Norwegian boards suffered as a result of the quota—they took on more debt and their acquisitions underperformed. One of the study's authors, Amy Dittmar, explained in a New York Times blog post that at the announcement of the new law, the firms' values fell by 2.6 percent on average, and by 5 percent for companies that previously had had no women on their boards. Those losses continued as they changed their boards.

However, she added that this was due to a lack of experience, not gender—the women added to boards tended to be younger and less experienced than their male counterparts.

All of this might be putting the cart before the horse, of course, as quotas would likely be a tough sell in the U.S. Romero acknowledges as much. "We in the U.S. don't like to be told what to do, but it's going to come down to that," she says.

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Caren Goldberg, professor at American University's Kogod School of Business, agrees that the idea of instituting quotas would be extremely unpopular, and she also thinks they could in fact worsen women's position in American business.

"I guess in the sense that a lead balloon goes over, [quotas] might go over. I don't think that that's going to be an effective way to address gender disparities on corporate boards," she says.

She points to the American blowback from affirmative action. Because some people perceive affirmative action as being a quota system that takes jobs away from more privileged groups like white men, it can make women and minority hires look less legitimate.

"I would say it's not a good idea to go with the quota system because then you would be tokenizing a lot of people, which I think waters down the merits of the people who are truly qualified, such as Sheryl Sandberg," says Goldberg.

Quotas may not be necessary, anyway; rather, the market may simply open the door to gender diversity. Romero says that, if women wield their buying power to patronize and invest in businesses with female leadership, "they're not going to need quotas."