The introduction of mandated gender quotas for corporate boards (1) has been a key policy instrument in addressing the long-standing female board underrepresentation. While these policies are controversial, we wanted to analyze how gender quotas could shape not only female representation but also shareholders’ preferences and their perceptions of female directors.
To do so, we have studied, in our latest article (2), the effects of gender quotas in France, using a dataset of over 2,700 director elections between 2007 and 2020. By doing so, we were able to compare the way individual – male and female – candidates characteristics were understood and evaluated, pre- and post-quota.
We find that in terms of gender diversity, the 2011 French law has been, clearly and rapidly, a success. Even more interesting: we uncover the fact that shareholders massively and positively revise their perceptions of (potential) female directors’ qualifications, including backgrounds and prior board experience. This thus led to the first finding – and the objective of these laws ! – i.e a net feminisation of Boards.
The Case for Mandated Gender Quotas
Advocates of gender quotas argue that these policies are necessary to overcome the obstacles women face in reaching leadership positions. Their argumentation rests on the view that corporate boards have been male-dominated due to organizational cultures and hiring practices that rely heavily on informal networks, often favoring male candidates.
On the other hand, critics argue that quotas interfere with meritocratic selection of board members. They argue that the underrepresentation of female board members is not a reflection of discrimination but rather a consequence of a limited supply of qualified women available for board positions. In their view, mandating gender quotas could force companies to appoint less-qualified candidates, ultimately reducing board effectiveness and shareholder value.
To partly help us to shed light on these issues, the aim of our study is to examine shareholders’ perceptions of female director candidates before and after the mandated quota introductions in France.
France’s “Loi Copé-Zimmermann”
In France, the 2011 “Copé-Zimmermann” law mandated gender quotas on corporate boards, requiring firms to meet gender diversity thresholds of 20% in 2014, which increased to 40% in 2017. The law applied to large companies with more than 500 employees or revenues exceeding €50 million. For non-compliant firms, the law imposed severe penalties, including restrictions on the remuneration of board members in firms that failed to meet the quota.
By looking at simple statistics, the law was successful in promoting gender diversity. France went from one of the lowest rates of female board representation (8.4%) in Europe in 2009, by 2021 this number surged to over 43%, making France a leader in gender-diverse boards.
How Shareholders Respond to Gender Quotas
With this background, we study the effects of gender quotas in France, using a dataset of over 2,700 director elections between 2007 and 2020 in France’s largest publicly listed firms. Unlike prior studies that focus on share price reactions around the enactment of quota laws, we instead evaluate director election outcomes before and after the quota introduction. By studying the popularity of individual directors through votes at the annual general meeting, we are able to evaluate shareholders’ preferences attached to individual candidate characteristics, pre- and post-quota.
We find that shareholder support for female directors increased after the quota's introduction. Female candidates received greater support than their male counterparts, post-quota, suggesting that shareholders revised their perceptions of female directors’ qualifications positively. Our results indicate that the supply of qualified female candidates was sufficient to meet the increased demand, and that shareholders did not simply elect women under pressure from the law.
Gender Quotas and the Elimination of Pre-Quota Frictions
Gender quotas also helped to address pre-existing labour market frictions that hindered the appointment of qualified female candidates. Before the introduction of quotas, the underrepresentation of women on boards could potentially be attributed to informal recruitment practices and network effects that limited the visibility of female candidates. French corporate governance, in particular, is characterized by a reliance on elite networks, with many board members being recruited from a small group with a background from prestigious institutions (Grandes Écoles). This network-based hiring process often marginalized qualified women.
Potentially, the quotas incentivized firms to invest in new search technologies and expand their talent search pool beyond traditional networks. The recruitment process for board members has become more efficient and more diverse, and candidates with solid credentials have begun to be recognised and appointed to boards in greater numbers. Notably, our findings suggest that female directors’ educational backgrounds and prior board experience were increasingly valued by shareholders after the introduction of the quota, highlighting a shift in how female candidates are perceived. We do not find evidence in support of that firms are forced to appoint less-qualified female candidates to comply with the law. Instead, female nominees were often just as qualified as their male counterparts.
The Broader Implications of Gender Quotas
The French experiment with gender quotas provides valuable lessons for other countries considering similar measures. While there are legitimate concerns about the potential unintended consequences of quotas, our evidence suggests that quotas can be effective in promoting gender diversity without compromising the quality and effectiveness of the board as perceived by shareholders. In fact, gender quotas can lead to re-evaluation of female candidates’ qualifications and the breakdown of potentially discriminatory hiring practices.
Additionally, gender quotas can have broader societal benefits by challenging traditional gender norms and encouraging more equal representation on corporate boards. As more women are appointed to corporate boards, they can serve as role models and mentors for future generations of female leaders, also helping to address gender disparities in other areas of the economy.
References
(1) 2011 in France : https://www.legifrance.gouv.fr/jorf/id/JORFTEXT000023487662/
2022 at EU level : https://www.europarl.europa.eu/news/fr/press-room/20221118IPR55706/des-regles-decisives-pour-favoriser-l-egalite-dans-les-conseils-d-administration
(2) Magnus Blomkvist – EDHEC Business School, Eva Liljeblom – Hanken School of Economics, Anders Löflund – Hanken School of Economics, Etienne Redor – Audencia Business School. On the Effectiveness of Gender Quotas: Insights from Shareholder Preferences (2024), SSRN Papers. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4698321
