Even though the principles of liberalism suggest quotas are a terrible idea, Americans can still learn from Germany's great social experiment. Here's why.
(1) Even the Threat of Quotas Gets Companies to Hire Women ...
The German quota experiment isn't asking DAX companies to do much more than they're already doing. In 2011, then-Labor Minister Ursula von der Leyen said she was “completely convinced” any pledge to increase female representation “won’t work without laws.”
She was wrong. A PricewaterhouseCoopers survey in June put the proportion of women on DAX company supervisory boards at nearly 22 percent, up from 13 percent in 2011. Even the threat of binding quotas was enough to get companies moving, either because they wanted to forestall the actual legislation through a show of good faith, or (if you’re inclined towards a rosier reading) because the policy discussions alone have helped shift corporate culture.
(2) ... But Sometimes, It's Just for Show
One outstanding question for the German experiment is: Does making a quota really change the culture?
German boards, unlike those in the U.S., are divided into a “management board” containing executives and a “supervisory board” akin to the U.S. board of directors. Unlike quotas elsewhere in Europe, German quotas will only apply to the supervisory board: It would be unusually easy in these circumstances for companies to meet the law’s requirements by simply placing women on the supervisory board while keeping them out of the company's decision-making positions.
This has been a problem in other countries even with different requirements: Reviewing available research in 2011 for a background paper for the World Development Report on Gender, Rohini Pande and Deanna Ford wrote that Norway’s quota system was associated with an “increase in women serving on multiple boards,” but not necessarily an increase in the total number of women serving. In addition, there was “mixed evidence on whether companies replace male directors with female directors or if they increase the overall size of the board in order to reach the target.”
(3) We Don't Know Whether Quotas Hurt Economic Performance
The German plan will provide fresh data on the potentially adverse consequences of quotas, as well. On the one hand, as one editor at German paper Die Zeit recently pointed out, these quotas aren’t that demanding, given the current boardroom demographics: 22 percent to 30 percent isn’t the largest of jumps. Nor are there severe penalties for failing to find enough female candidates. If the quotas aren’t reached, the seats on the board will simply stay open.
On the other hand, there’s always a concern about quotas disrupting a company’s ability to pick the best person for the job. The president of Gesamtmetall, the employer association for the metal and electrical industry, has already complained to the Rheinischen Post that the policy approaches the problem backwards, failing to address a fundamental supply problem.