California moves toward corporate gender quotas, ignoring Norway’s failure

Supporters of California’s move toward the nation’s first-ever corporate gender quotas have insisted the bill will be good for business, but that’s not what happened in Norway.

After the Norwegian Parliament required that women make up 40% of publicly traded corporate boards in 2006, stock prices plunged and firm values dropped as boards added less experienced female directors, while the numbers of public firms decreased and private companies increased.

“The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance, consistent with less capable boards,” said the 2012 paper by USC professor Kenneth R. Ahern and University of Michigan professor Amy K. Dittmar.

 Critics of Senate Bill 826 have pointed to the study, “The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation,” as they warn Gov. Jerry Brown that signing the bill could hasten the exodus of California firms to Texas.

Many Norwegian companies have apparently moved, collapsed or gone private. The number of public limited firms in Norway by 2009 was less than 70 percent of the number in 2001, according to the study, while the number of privately held firms not subject to the gender quotas jumped by more than 30 percent.

Europe has led the way on board gender diversity, with France, Italy, the Netherlands and Germany following Norway’s example, but the argument for mandatory gender quotas has in recent years made the leap across the pond.

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