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ResearchFebruary 4, 2019

Gender quota on corporate boards in Italy had no spillover effects

Representation of women in top executive and high-paid positions remains low

© iStockphoto.com/alvarez

The low representation of women in top earnings positions is a major obstacle for closing the remaining gender pay gaps and achieving full gender equality. Even though women make up almost half of the labor force, they are becoming increasingly scarce the higher one moves in the earnings distribution, and they are also severely underrepresented in leadership positions.

Mandated gender quotas have been suggested as a policy measure to promote female career progression towards the top. In 2003, Norway was the first country to pass a law requiring a minimum representation of 40% for each gender on the boards of listed companies. Since then, Austria, Belgium, Denmark, France, Ireland, Iceland, Italy, Germany, the Netherlands and Spain have followed suit, adopting similar regulations. In the Europe 2020 Strategy, the European Commission proposes a law that requires a minimum of 40% female board members in listed companies across the European Union.

These laws are intended to break the “glass ceiling” which prevents women from advancing into top corporate positions. In a new IZA discussion paper, Agata Maida and Andrea Weber evaluate the Italian law of 2011, which installed a stepwise increase in gender quotas that remain effective for three consecutive board renewals of listed limited liability firms.

No effect on female executives and top earners

The researchers link firm-level information on board membership and board election dates with detailed employment and earnings records recently issued by the Italian Social Security Institute (INPS) through the VisitINPS scholar program. Exploiting the staggered introduction of the gender quota regulation and variation in board renewals across firms, they evaluate the effect of the board gender composition on measures of gender diversity in top positions over a period of four years.

While the Italian reform led to a fourfold increase in female board members (from 193 in 2011 to 758 in 2017), the study finds no evidence of spillover effects on the representation of women in top executive or top earnings positions. “There is some indication that listed companies promoted one of their female managers as a CEO. But these promotions did not lead to a higher representation of women among top earners in the company”, the authors write.

Results compare to Norway

These results confirm the findings of an earlier IZA discussion paper (now published in the Review of Economic Studies) on the introduction of a gender quota for board members in Norway. Even though Italy is a much less gender-egalitarian country than Norway with lower female labor force participation, higher gender wage gaps, and lower representation of women in the top of the earnings distribution, the strict enforcement of gender ratios on boards of directors does not have a trickle-down effect that leads to changes in the overall labor market situation of women.

Potential explanations

Why did the Italian board quota fail to generate the intended effects? The study points at several potential explanations:

  • First, the number of high-profile positions created by the reform is relatively limited, which suggests that the coverage of the law should be extended to a much wider range of companies.
  • Second, if the law affects perceptions and social norms about women in top positions, economic outcomes might respond with some delay, and the analysis of short-term effects might not capture the full extent of its impact.
  • Third, newly appointed female board members might not be in powerful positions that allow them to influence changes at the firm level. Recent findings from Germany and France show that newly appointed women on supervisory boards are less likely to hold key positions than their male counterparts, which weakens any potential positive effects of a gender quota.

The authors conclude that “while a higher female representation on corporate boards is certainly desirable on the ground of equity concerns, our findings do not support the idea that the gender quota alone represents an effective tool to reduce gender disparities within firms, especially in a country like Italy characterized by a traditional gender culture.”

Alternative solutions

In an article for the IZA World of Labor, Nina Smith provides a broader picture of the pros and cons of gender quotas on boards of directors from an economic perspective. She concludes that policymakers “may have to change their focus from requiring quotas for the top of an organization to the much broader task of getting a more balanced gender division of careers within the family, for instance by encouraging more fathers to take advantage of parental leave schemes.”

Featured Papers:

IZA Discussion Paper No. 12099 Female Leadership and Gender Gap within Firms: Evidence from an Italian Board Reform Agata Maida, Andrea Weber IZA Discussion Paper No. 8266 Breaking the Glass Ceiling? The Effect of Board Quotas on Female Labor Market Outcomes in Norway Marianne Bertrand, Sandra E. Black, Sissel Jensen, Adriana Lleras-Muney IZA Discussion Paper No. 11057 Has the Push for Equal Gender Representation Changed the Role of Women on German Supervisory Boards? Viktor Bozhinov, Christopher Koch, Thorsten Schank IZA World of Labor, Article No. 7 Gender quotas on boards of directors Nina Smith

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