But as new female directors gain more experience, these costs are likely to diminish. More importantly, some initial value reduction—a one-time transaction cost—may be an acceptable trade-off for the longer-term benefits of gender diversity on corporate boards, which my research suggests may enhance the quality of corporate governance and promote broader social equality goals. And the negative performance effects could be mitigated through regulatory design. States, for example, could require a more gradual increase in gender representation than Norway did, beginning with initial lower targets and giving firms a more extended period to come into compliance.
Even if the worries about firm valuation can be addressed, quotas still present a variety of concerns worth engaging. Are quota regimes viable strategies in countries whose social and political cultures differ from Norway’s, or whose corporate governance structures differ? In Norway, a number of publicly traded firms turned private before the law came into effect, possibly to evade the mandate. If this is what occurred, how likely is it that companies in other places will follow suit? If women cease to be outsiders and become part of existing male networks, will they lose their valuable independence?
It will take more time to answer these questions with clarity. But for now, such questions are peripheral to the situation here in the United States, where quotas are an unlikely prospect and efforts to address the gender gap have been anemic at best, such as a 2009 regulation promulgated by the Securities and Exchange Commission that requires listed companies to disclose whether they take “diversity” into account when composing their boards and, if so, how. The rule does not define diversity and corporate America has given it a range of meanings. In my book, I analyze the disclosures submitted to the Commission between 2010 and 2013 by the S&P 100. My findings will not inspire confidence among those concerned with the gender imbalances I noted at the outset.
Though virtually all companies I studied complied with the rule, only half defined diversity to include socio-demographic characteristics such as gender or race. Instead, most firms construed diversity to entail diversity of background or experience. Ford Motor Company, whose board consists of two women and 14 men, submitted the same disclosure each year for the four years I studied: “Ford recognizes the value of diversity and we endeavor to have a diverse Board, with experience in business, government, education and technology, and in areas that are relevant to the Company's global activities.”
Even cursory reporting can amount to compliance. Berkshire Hathaway disclosed that it “does not have a policy regarding the consideration of diversity in identifying nominees for director. In identifying director nominees, the…Committee does not seek diversity, however defined.” Compliance thus does not require meaningful engagement with the diversity question.