The Problem at Hand
Norges Bank Investment Management, the entity that manages Norway’s fund, put forward illuminating statistics about the current representation of women in business in its Monday paper calling for systemic change. According to the fund, while more women have been appointed to the boards of companies in recent decades, just 26% of board members in G-7 countries are female. “While there are many different dimensions to diversity, we are particularly concerned by persistent underrepresentation of women on boards,” said NBIM.
Norway adopted a quota of 40% for female board members in 2004, becoming the first country to do so. It was quickly followed by the likes of Germany, France, Iceland, and Italy, which set mandatory quotas ranging from 25% to 40%. However, the sovereign wealth fund’s findings clearly show a disparity between the goals set for companies and the realities of their corporate diversity. The problem in the business world runs deep — including in the US — where just 6% of S&P 500 company CEOs are women, despite the fact that this gender makes up nearly half of all S&P employees.
Sovereign Fund Cracks Down
The sovereign fund’s announcement this week took the position that all companies with boards positing less than 30% female representation should set targets for gender diversity and report on the progress. NBIM also asked companies to “regularly assess whether [their board] collectively has the right mix of competences and backgrounds.”
This is a powerful stance because of the powerful influence of Norway’s sovereign fund in the business community. As one of the world’s largest investors, the fund holds a stake in roughly 9,200 companies across the world and owns 1.5% of all listed stocks, according to Reuters. It has previously led the way for companies addressing numerous social issues like environmental impact and corporate governance.
Though it won’t solve the long-lasting drive for gender equity in business, it’s an important and influential gesture that the world’s largest sovereign wealth fund is weighing in on this conversation. There are plenty of studies showing that companies with higher representation of women board members have better financial performances. Thus, it’s only natural that one of the world’s largest investors clearly sees it as in everyone’s best interest that the playing field gets a little more even.
About the Author
Jemima is a journalist who enjoys reporting on business, particularly small business and entrepreneurship.