ABSTRACT

A number of countries have taken initiatives to improve gender diversity on their corporate boards. This intervention was considered essential to promote mentoring and educational development of women leaders, and also due to higher media attention and political pressure (Grosvold et al., 2007). Diversity management in these countries has been carried out in one of three ways, namely coercive (through legal intervention), liberal (seeking voluntary corporate commitment) and collaborative (cooperative measures in cooperation with stakeholders) (Whitehead and Normand, 2011). Norway is the first country to adopt mandatory gender quotas on boards of their public companies (Ahern and Dittmar, 2012), while the UK has achieved it through voluntary targets adopted by companies on recommendations by regulatory agencies (Department for Business, Innovation & Skills (DBIS, 2015).

Gender diversity investigation traditionally seeks to assess the impact of diversity management and the impact of board diversity on performance, showing a comparison in the context of countries. Grosvold et al. (2007) followed the same pattern in a longitudinal study (7 years in the UK and 4 years in Norway), exploring different approaches in 2007, i.e. pre-Davies and pre-quota execution eras in the UK and Norway, respectively. A lot has changed since then; Norway having achieved 40% gender diversity on boards of its publicly listed companies, in 2008, the year of its execution with full force (Ahern and Dittmar, 2012), now stands at 35% gender diversity on boards of its publicly listed companies (DBIS, 2015). In the UK, with traditional ‘comply-or-explain’ approach to governance and cooperative approach to board diversity (Financial Reporting Council (FRC), 2014), FTSE 100 companies have managed to overachieve Davies ’s voluntary target of 25% gender diversity on their boards and now have no all-men boards (DBIS, 2015). It is time to explore some of the success stories of these countries that used different approaches and investigate the reasons and results of those approaches.

We present a comparison of gender diversity management carried out in Norway and the UK in the 21st century, and the strategy adopted in these countries. The choice of diversity management practices adopted by nations/corporations seems to be influenced and determined by socio-economic factors prevailing in those countries. We analyze the distinct characteristics prevailing in these countries, such as traditional acceptance for coercive/mandatory intervention, ownership patterns, prevailing legal systems, governance structures and social perspectives towards working women. We argue that the selection of approach in these countries, towards diversity management for board, hinges on the path dependency theory (Leibowitz and Margolis, 1995). The phenomenon is also in accordance with the institutional theory (Meyer and Rowan, 1977), which argues that institutions adopt established structures for legitimacy and survival in the institutional environment. We primarily compare the coercive approach of mandatory quota on boards in Norway and cooperation approach of government-recommended, voluntary targets in the UK. We also trace path dependency in legal systems (e.g. civil law versus common law), governance approaches (e.g. stakeholder versus shareholder) and development indicators in Norway and the UK to substantiate our argument. While UK is a liberal regime where governance is mostly regulated with the principle of ‘comply-or-explain’ (FRC, 2016), government in Norway historically have played a more substantial a role with emphasis on its social welfare agenda (Korpi, 2001; Cox, 2004).

We also analyze the recent phenomenon of decreasing gender diversity on Norwegian boards – down to 35% in 2015 (DBIS, 2015). Exploring the reasons of this development which has taken place despite the provision of liquidation of a firm for its failure to comply with the quota law, we posit that the Actor–Network theory (Law, 1992) may be a possible explanation for it, which propounds that institutions grow along with the actors and the networks involved with them and organizations are influenced by network effects. We investigate if the phenomenon is due to the economic/commercial cost that might have resulted from a failed experiment or due to increasing international networking pressures on countries and their legal/governance systems.

This chapter may contribute towards better formulation of board diversity regulations by highlighting that board diversity management approach, as adopted by a country, is more effective, if it is adopted by the countries with respect to the prevailing path dependency in other related domains. The study also explores the potential causes of declining gender diversity on Norway ’s boards and thus may help the legislative authorities to understand the phenomenon. Lastly it points out that with increasingly interconnected world, corporations may need to evolve more conciliatory approach to implementing best practices relating to their social welfare measures, such as gender diversity on boards.