ABSTRACT
Being a director in the executive team or board of directors of a listed company, is the highest reachable position in the corporate world. Even though more and more women take part in the workforce and they are higher educated than ever, their share in the highest echelons of companies is still limited. In Norway the government decided to go beyond voluntary measures and to force companies to let their boards exist of at least 40% women, what is the effect of this institutional change on the Norwegian business elite? Has this law only influenced the composition and characteristics of the board of directors, or has
the executive management changed in the same manner?
It turns out that the gender equality law not only caused an increase in
1. INTRODUCTION
The presence, or absence, of women in top management teams (TMT’s), is a highly discussed topic. Research from several countries pointed out that although their numbers are increasing, women still make up a minority in
TMT’s1.
Many explanations for this absence have appeared, such as the glass
ceiling, the BOGSAT‐phenomenon2, the secondary‐earner bias (Chamallas, 2000),
tokenism (Kanter, 1977), the tall poppy syndrome3 (Branson, 2007), homosocial
reproduction among male board members (Kanter, 1977), and many more. These are all explanations of why women did not enter to the highest echelons of the corporate world, while they are nowadays as highly educated or even more highly educated as men and make almost half of the work population.
What will happen to a national business elite if an institutional change forces companies by law to change the composition of their boards and forces them to add women to their board of directors? Will such a law only affect the board of directors, or will it also affect the composition of executive management teams? In other words: will an increase in female directors cause an increase in women
in (executive) management?
Will the characteristics of persons in this elite, besides their gender,
change? Companies will have to select their board members from a different pool than they were used to. Will this different way of selecting board members result in a change in the business elite in terms of age, education and nationality of top management team members?
gender balance in their boards. Whereas in the United States the average board member is male and a WASP, White Anglo‐Saxon Protestant, in Norway over half of the board members of listed companies in 2002 was aged between 45 and 65, white male and lived in the same neighbourhood: within a 3 mile radius in West End in Oslo (Professional Boards Forum, 2009a).
It was a men, who decided that this situation had to change: the Secretary of State for Trade and Industry, Mr. Ansgar Gabrielsen of the conservative party wanted the boards to be more heterogeneous and decided that the only solution to achieve this, was to force companies by law to obtain gender balance in its boards. Without consulting the cabinet, he talked to a journalist about his plan in February 2002. He said that he wanted to give companies two years to obtain gender balance voluntarily. Gender balance means that at least 40% of the members of the boards should be either women or men. If companies would not comply, he would introduce a law that forces companies to obtain gender balance. A lot of opposition arose, both in politics, and in business. Women did not want to be on quotas, they wanted to be elected for their qualities. Male board members thought there were not enough women. And he met opposition within the government as well. However, many politicians did not want to be seen as “against” women, so, eventually, the law was passed (Professional
Boards Forum, 2009a).
The Norwegian government saw the introduction of this law as a way to
achieve equality between men and women. Norway, like most Western countries, faces an aging population and falling birth rates. This makes it even more important to use all the resources a country has, not only half of it
(Regjeringen, 2006).
Companies first got the chance to obtain gender balance voluntarily: in
2002, 6% of the board members in Norway were female; However, by 2004 the number only slightly increased to 9% (Statistisk sentralbyrå, 2005), so the law came into force for state‐owned public limited companies in 2004, and for
private public limited companies in 2006. Not complying with this law by the 1st
consequence of this law was that within a few years, around 700 new female board members had to be found, and were found, because the quota was met in
December 2007 (Professional Boards Forum, 2009a).
The law concerns the board of directors of a company and not the
executive management. The board of directors was chosen for practical reasons; some laws already existed among the board of directors: for example, if a company has more than 200 employees, employee representatives have to be chosen. The minimum size of the board is also fixed: companies with over 200 employees should have a board of minimally 12 directors (NCGB, 2007). So, since the 40% rule does not concern the executive management, women remained underrepresented in this part of the top management team (Teigen,
2008a).
In this research the executive management has been taken into account as
well, because more women in the board of directors might have positively influenced the appointment of executive board members: women directors have to be represented by 40% in committees as well. The nomination committee is responsible for the nomination of executive managers. If more women are represented in this committee, it may cause that female committee members appoint more women executives than male committee members alone would do. 1.1 Problem statement
The situation in Norway is unique, it was the first country that imposed a law that forced companies to hire female board members, while these companies would previously probably have chosen for males. This lead to a selection problem in recruitment: in a short period of time, many new female board members had to be found while there had never been so many women in
Norwegian boards.
An important argument by opponents of the quota arrangement was that
it would not be possible to find enough qualified women in such a short time. They simply would not be there (Teigen, 2008b). However, in a short time they
did find the required 700 female board members. So, Teigen (2008b) suggested
has changed. Furthermore, she would like to know where these new women come from and how it could be possible that the proportion of women in
corporate boards increased from 6 to 40% in just 6 years?
In a study done by Branson (2007), he found that the majority of male board members in the United States could be found among CEO’s of other companies. But as there were hardly any female CEO’s in Norway, companies had to look for other candidates to achieve gender balance in their boards. Where did they come from? Did they have a business background, or did they come from other professions, such as politics, or law?
What would have been the effect on the traits of the Norwegian business elite now that companies had to look in a different pool for board members? Will these companies have looked for candidates outside the country? Will they have selected younger women? Will a scarcity of qualified women caused by the introduction of the gender equality law have lead to a decrease in the requirements for education among women? The law only required an increase in female non‐executive directors, but has it lead to an increase in female executive directors as well? Have the characteristics (age, nationality, background, education) of female executive directors changed in the same way as those of female non‐executive directors?
These questions lead to the main question of this research: How has an
institutional change that required companies to obtain gender balance in their boards of directors affected the characteristics of the business elite in Norway? The
following sub questions were answered in this study. How do women in the
boards differ from the men that are on the board? And: Have the characteristics of female executive directors changed in the same way as the characteristics of female nonexecutive directors?
2. LITERATURE REVIEW
From a theoretical perspective, one can model the labour market as consisting of job queues and labour queues, which subsequently determine the outcome of the labour market. Employers want to hire workers from as high in the labour queue as possible, while workers accept the best job that is available for them. The result is that workers that are most wanted get the best jobs and jobs that are less attractive go to workers lower in the labour queue. The lowest‐ranked workers may become jobless and the worst jobs may be vacant (Reskin and
Roos, 1990).
Productivity and labour costs are important for determining the place in
the labour queue for a worker (Maume, 1999). For higher ranked jobs, it is often more difficult to identify productive workers in comparison with lower ranked jobs like production work. Men and women may want the same type of job, but employers rank men above women in higher ranked, ‘male’ jobs, because they have the stereotypical believe that men are “stronger, more rational and more mechanically adept” (Reskin and Roos, 1990:36) and women have a higher absentee and turnover rate. These considerations change the labour queue into a gender queue: the highest paid and most preferred jobs have become the most
sex segregated (Reskin and Roos, 1990).
When there are not enough highly ranked workers to fill all the preferred
jobs, employers have to go down the labour queue and hire less preferred workers. Labour shortages can create opportunities for workers in the lower‐ ranked groups (Reskin and Roos, 1990). The institutional change in Norway created a labour shortage for positions in the board of directors and it forced companies to go down the labour queue and hire board members that originally were placed lower in the labour queue: women. What are the reasons that there are so few women in the highest positions in the corporate world?
2.1 Reasons for the lack of women in top management teams
is the only reason why women do not enter into the highest echelons of companies.
2.1.1 Experiencebased bias argument
The experience‐based bias argument states that the reason why women are underrepresented at the highest decision‐making levels is because they lack the required experience. They do not possess the characteristics that are desirable for obtaining a position at this level. This view argues that, as long as women and men would possess the same characteristics, they would be treated equally
(Bilimoria and Piderit, 1994).
An important argument for the lack of women in top management teams
is their lack of profit‐and‐loss responsibilities and line management experience (Branson, 2007). The experience‐based bias argument argues that if women would have had these experiences, they would be included in companies’ top management teams.
2.1.2 Sexbased bias argument
On the other side, the sex‐based bias arguments argues that not a lack of experience is the reason of the absence of women in the highest echelons of companies, but that women are held back from these positions, no matter how qualified they are. Women have to proof themselves more to achieve the same, they are being supported less and not rewarded as highly as men with the same qualifications would have been (Bilimoria and Piderit, 1994).
Hitt and Barr (1989) found that sex was an issue when both men and
women were in the selection process for mid‐ and upper level management positions. Although both had equal qualifications, men were more likely to be
selected than women.
In the sex‐based bias argument, gender is the reason why women do not
women have changed over time: from the “housewife contract”, to nowadays the “gender‐equality contract”, but although the ways in which gender relations are organized is changing, the structure remains the same. Hierarchy and segregation are putting men and women in position of domination (men) and subordination (women) (Teigen and Wängenerud, 2009).
In the secondary earner bias, women are always seen as coming after that of her husband. Even if she is earning more, she is still seen as supporting her husband. When women are evaluated for a promotion, they might be graded lower because of this bias (Branson, 2007). Both theories tell something about the mindset of men: in their view, women are still not seen as being equal to men and if this situation remains the same, their chances of reaching top management
teams remain small.
This stereotypical view also becomes clear in the following example:
having or wanting to have young children is seen as a potential disruption of a women’s career, but as a proof of stability for men (Maume, 1999, Reskin and Roos, 1990).
Until the 1980s, filling managerial position was a matter of sex‐based ascription. “Ascription exists when a status, position, or opportunity is allocated at least in part on the basis of an ascribed characteristic.” (Reskin and McBrier, 2000:210) Tough‐mindedness and other male traits characterized a “managerial ethic”. Male managers are more familiar with males instead of females and therefore ascription was used as a risk‐avoiding practice. Social cognition research has pointed out that people prefer in‐group members to out‐group members. Which leads to a homosocial reproduction (Kanter, 1977) in the selection of board members (Reskin and McBrier, 2000).
2.1.3 Tokenism
individuals: as representatives of their group. It depends on the size of the group, but if tokens are individuals in a group, they will be called “solos”, representing
the only one of their type.
Having only one or two tokens in a group makes it difficult for, in this
case, women to generate a powerful alliance. The next step is the tilted group: these groups have a ratio of for instance 65:35 and here dominants are a majority and tokens a minority whose members are potential allies that can affect the culture of a group. Finally, a balanced group has a ratio of 60:40 until
50:50 (Kanter, 1977).
Even if the typical behaviour that is said to happen when someone is
considered a token (practical jokes, application of stereotypes, etcetera) does not occur in the boards of publicly held companies, this behaviour does occur at lower management levels and may disrupt the women’s rise to the top of the company. Therefore, even if it might not occur in the boardroom, tokenism does influence women’s rise to the top.
2.1.4 The glass ceiling effect
The glass ceiling effect has often been named as a reason for the scarce representation of women in top management teams (c.f., Cotter et al, 2001, Bilimoria and Piderit, 1994, Huse and Solberg, 2006, Bertrand and Hallock, 2001). “The glass ceiling represents an invisible barrier that separates women and minorities from advancing into top management positions” (Buelens et al, 2006:150). Even if one woman would advance to becoming the CEO of a large listed company, this does not mean that the glass ceiling does not exist anymore. One of the criteria Cotter et al described for the glass ceiling is: “a glass ceiling inequality represents a gender or racial inequality in the chances of advancement into higher levels, not merely the proportions of each gender or race currently at those higher levels.” (2001:659). So, it is the chance of advancement for women, and not the current level of, in this case, female top
management team members that matters.
Even in advanced countries like Norway, known for its egalitarianism, the
2.2 Benefits of having more women in top management teams
Making a top management team more diverse through adding more female directors to the board of directors or the executive management team has several advantages. Women are often considered to have a different perspective on the company’s products, especially when most buyers of the companies’ products are female, and help the board’s decision‐making processes through providing a different look on issues (Hillman, Cannella and Harris, 2002; Adams and Flynn, 2005; Daily, et al, 1999). Groupthink is less likely to occur when
boards are more diverse (Branson, 2007).
Female board members are said to be better prepared for board meetings
than their male counterparts. In their study about Swedish and Norwegian female board members, Solberg and Huse quoted a female board member: “I have seen that male members of this board open the envelope in the elevator. We were often joking by saying that the boardroom should be as far as possible away from the garage. The quality of the board meetings was a function of the distance between the boardroom and the garage” (Huse and Solberg, 2006:119). More women in the boardroom can lead to more women in the executive team. Executive search firms often compile shortlists for new board members. Their primary sources for this list are other board members and CEOs. If more women become the CEO or board members of a publicly held company, then the number of female top management team members may increase faster (Branson, 2007).
Female board members themselves can also lead to more females in the
board or in the executive team: they can act as mentors and role models for female managers. Besides that, they can improve equality among male and female managers: female directors can serve as advocates of keeping hiring and promoting of women on the board agenda (Reskin and McBrier, 2000; Bilimoria and Piderit, 1994).
3. SITUATION IN NORWAY
Female board members are more likely to get hired when an open recruitment method is being used. When board members are recruited through informal networks, chances are higher for male board members (Reskin and McBrier, 2000). Not being able to join social networks is therefore seen as an important barrier for success for women to reach the boardroom (Branson, 2007; Adams
and Flynn, 2005).
In the past, the only person who had the responsibility of selecting board
members, was the CEO. When selecting new top management team members, CEO’s were looking for candidates considered acceptable to outsiders. Therefore, they would prefer CEO’s or presidents of large, listed companies (Khurana, 2002). Nowadays, most companies have a nomination committee (Burke, 1997). In the United States it is even obliged by the Securities and Exchange Commission (SEC) to disclose information about the selection process by the nomination committee. The informal traditional process mostly lead to a pool of candidates that was equal to the directors that were on the board at that moment, it lead to a replica of the demographic composition of the current board, the so‐called homosocial reproduction (Kanter, 1977). This gave women less chance to be appointed as a director (Adams and Flynn, 2005; Reskin and McBrier, 2005).
In Norway the government decided that the only way to change the situation and to include women in the boards of directors, was to introduce a law to force companies to let their boards consists of a minimum of 40% female directors.
Norway, often considered as being one of the most egalitarian countries
3.1 Equality in the Norwegian labour force
The World Economic Forum rated Norway second (after Sweden) as most egalitarian country in their Global Gender Gap Report (Hausmann, Tyson and Zahidi, 2007). This research looked at economic participation and opportunity, educational attainment, political empowerment and health and survival of men and women. Norway scored high on all these aspects.
Equality between men and women is increasing in Norway. In certain areas women are performing better than men, for example in education: nowadays, women are more often graduating from universities than men: 38% versus 25% (Statistisk sentralbyrå, 2008), and in the labour market, women are almost working as often as men. In the year 2008, 75,7% of males between 15 and 75 were active in the labour market, compared to 70,2% of all females (Statistisk sentralbyrå, 2009a). However, 43% of women are working part‐time, compared to 13% of men (Statistisk sentralbyrå, 2009b).
In The Netherlands, the situation is as follows: 76% of males between 15 and 65 were active in the labour market, compared to 59% of females within that age range (Centraal Bureau voor de Statistiek, 2009a). Although the figures for the Netherlands are for persons until 65, while those for Norway are for persons until 75, we can still see a difference between The Netherlands and Norway. The percentage of working men is almost equal in both countries, while the number of working women in The Netherlands is 11,2 percent points lower than in Norway. The percentage of women working part‐time is in The Netherlands much higher than in Norway: 69,8%. The number of men working part‐time is slightly higher than in Norway: 15,4% (Centraal Bureau voor de Statistiek, 2009a). In The Netherlands, 51% of students studying at a higher education institute is female (Centraal Bureau voor de Statistiek, 2009b).
In politics, Norwegian women are well represented: they occupy 37% of the seats in the Norwegian Parliament, and an average of 36% of the seats in the municipal councils. However, only 17% of all mayors are female (Teigen, 2008a). All in all, in certain areas women are advancing, but in other areas stability remains. This combination of stability and advancement is also called the ‘Scandinavian paradox’ (Teigen, 2005).
3.1.1 Parental leave and daycare centres
The Norwegian government sees children’s day‐care centres as an important mean for achieving gender equality. About 80% of Norwegian children between 0‐5 years go to day‐care. Parents have to pay a maximum fee of NOK 2330 per month (256,97 Euro). The parents, state and municipalities finance day‐care centres. Parents are accounted for 22‐30% of the total costs (Ministry of
Children and Equality, 2007).
Extensive parental leave in Norway makes it possible for women to
combine children with having a job. After the birth of a baby, parents have the right to take 44 weeks of parental leave at full salary compensation, or 54 at 80% compensation. However, 5 weeks of these have to be taken by the father, the so‐ called “father quota”. The parents can choose how to divide between the other weeks of the parental leave (Ministry of Children and Equality, 2006).
These facilities for women with (young) children make it easier for
women to remain working. 3.2 Culture
How can it be that in Norway, and not in another country, such a strict law on gender equality has been introduced? Besides the earlier mentioned topics,
culture might be a reason. Norway is the second least masculine country (52nd
place) in the world, after Sweden (Hofstede, 1991). The country scores 8 on a scale from 0‐100 on Masculinity, which means that it is a very feminine country. Sweden, the lowest scoring country on this value, scores 5. The Netherlands scores 14 on Masculinity, being among the most feminine countries as well.
Feminine countries are characterized by strong egalitarianism between
country and the percentage of women in that country that is fulfilling a higher technical or managerial function. In feminine countries, less pressure exists against women in higher functions, but women are often less ambitious (Hofstede, 1991). Less pressure exists against women in higher functions and egalitarianism being an important value in feminine countries, might be reasons for feminine countries to introduce a quota on women in top management teams. Besides Norway there are two other countries that have introduced (Spain), or want to introduce a gender equality law (Sweden) Sweden, the most feminine country in the world, has threatened to introduce a gender equality law as well if companies do not raise the percentage of women in corporate boards to 25% (Medland, 2004; Adams and Ferreira, 2008).
Another country that has recently introduced a gender equality law is Spain (Vinnicombe, Singh, Burke, and Billimoria, 2008). Spain scores 42 on the
Masculinity index, which means sharing a 37th position with Peru (Hofstede,
1991). This makes Spain a relative feminine country as well. The Equality Law
was introduced at the 22nd of March, 2007. Article 75 in this law obliges
companies to include “a sufficient number of women on their boards of directors to reach a balanced presence of women and men within eight years of the entry into effect of this act” (Secretaría General de Políticas de Igualdad, 2007:26). Other than in Norway, this law does not contain a quota for women on boards. 3.3 Affirmative actions and quota
Norway started with positive action and quota procedures in the 1980s, when quota arrangements were introduced for publicly appointed councils, boards and committees. The arrangements from then on introduced range from soft measures, to strict quotas. Teigen (2008a:6‐7) divided them into three types:
• Promoting procedures: this measure is typically practiced at admission procedures for universities and colleges: the underrepresented gender is being moved upwards in a queue.
• Minimum representation: with this rule, a requirement is set for a minimum representation of either gender. Mostly this means that either gender should be represented by at least 40%.
The gender equality law can be categorized under the last category: a minimum representation. It was the Norwegian Secretary of State for Trade and Industry,
Mr. Ansgar Gabrielsen, on the 22nd of February 2002, who said he was “unhappy
with the old boys’ network” on company boards and wanted to increase the number of women on boards to 40%. He gave companies two years time to voluntarily increase the number of females from, then, 6% to 40% (Professional
Boards Forum, 2009b).
The Norwegian Parliament passed the gender equality act in December
2003. A great majority voted in favour of this act, only one party voted against. The law would not come into effect if by July 2005, if the number of female board
members had risen to 40% voluntarily. This quota was not met, so by the 1st of
January 2006, the law came into effect for private limited companies that were
created after that date and by the 1st of January 2008 for the current private
limited companies. State‐owned companies already had to fulfil the rules by the
1st of January 2004 (Ministry of Children and Equality, 2008).
If a company would not fulfil the 40% quota, it would be dissolved or
delisted from the stock exchange. By April 2008, it became clear that all the public limited companies fulfilled the requirements and none of them had to be dissolved or delisted (Ministry of Children and Equality, 2008).
The representation of women on boards is arranged as follows (Ministry of Children and Equality, 2008):
• In a board of two or three members, both sexes must be represented. • In a board of four or five members, each sex must be represented by at
• In a board of six to eight members, each sex must be represented by at least three representatives.
• In a board of nine members, each sex must be represented by at least four representatives.
• In a board of more than nine members, each sex must make up at least 40% of the representatives. The representation of employee representatives must also comply with this rule, except when the workforce of the company contains less than 20% for one of the sexes. Otherwise, each of the sexes must be represented if there are two or more employee representatives in the board. 3.4 The Norwegian corporate governance code The Norwegian Corporate Governance Code requires companies to comply with the code or explain: if companies choose not to comply, they have to explain in their annual report the reason for not complying (NCGB, 2007). Boards in Norwegian companies can be either one‐tier or two‐tier boards.
The code of practice recommends that neither the CEO, nor other executive board members should be in the supervisory board (NCGB, 2007). It turns out
that most companies have two‐tier boards.
Norwegian boards are relatively large: there is a minimum of 12 board
members when a company has more than 200 employees. One‐third of the board members have to be chosen by the employees and two‐third of them by the shareholders. If a company has more than 200 employees, employees have to
take part in the supervisory board (NCGB, 2007).
The majority of the board members should be independent from the
management may not be a member of this committee and members may not be appointed by the board of directors. A remuneration committee and an audit committee are obliged when the CEO is a member of the board (NCGB, 2007).
The code does not set a limit on board appointments, but it does mention
the possibility of a board member not carrying out his duties because of holding a large number of other board appointments. But due to the fact that commitment varies from company to company, an absolute limit has not been
set.
The corporate governance code (NCGB, 2007) also mentions the balance
4. HYPOTHESES
The gender equality law caused a selection problem for Norwegian companies: women had to be included in their board of directors. How has this changed the business elite in terms of the nationality, background, education level, and the interlocks between companies?
4.1 Nationality of board members
Reiersen and Sjåfjell, 2008 wrote that in Norwegian newspapers is written that due to the law, the number of Danish women in Norwegian TMT’s had increased. Because so many qualified women had to be found in such a short period of time, it is not unlogical that Norwegian companies turned to foreign countries to recruit new female board members and that therefore the relative number of foreign female directors in comparison with the relative number of foreign male directors has increased.
Hypothesis 1. In comparison with male board members, female board members over time have become more diverse in terms of nationality.
4.2 Background board members
Hypothesis 2a. Female directors are more often a support specialist or a community influential than male directors.
The quota might have caused a relative increase in non‐business experts among women: the pool of available female business experts might have become smaller and companies might have turned to community influentials and support specialists among women to fulfil the requirements of the quota.
Hypothesis 2b. Due to scarcity of female directors with a business background, female directors over time are more often community influential’s and support specialists.
4.3 Education board members
Hillman et al (2002) found that female directors more often hold advanced degrees than men. According to them, they have to prove themselves and
establish credibility as a result of their education.
The law forced companies to look for another type of board member than
they were used to: women had to be found. In a relatively short period of time, a great number of women had to be found to take part in the board of directors in Norwegian public limited companies. A research done by Hillman, Cannella and Harris (2002) found that women on Fortune 1000 boards often have to prove themselves in order to be selected for the board. This makes that they therefore mostly are more highly educated than male directors. They confirmed the results of an earlier research done by Epstein and Coser (1981). But is this the case in Norway as well, or are there differences? Hypothesis 3a. Female directors are more highly educated than male directors. The requirements for female top management team members might have gone down, now that in such a short period so many women had to be found to fill board positions. For men the labour market has become tighter, therefore, they might have to fulfil stricter requirements.
4.4 Interlocking directorates
For directors it is not unusual to sit on more than one board. This has a number of advantages for boards: ties to other companies are advantageous for companies, becoming central in a network of firms increases the chances of survival. Besides that, someone who is already on a board has already proven himself on another board (Hillman et al, 2002). According to Hillman et al (2002), this reduces the risk of the unknown; it increases the “salience” of a director. Because women are relatively rare on boards, and because board diversity becomes more and more important, or even obliged as in Norway, women are more visible and therefore more salient when they are in a board. These women might be more easier recalled when directors of another company are looking for new directors and therefore Hillman et al (2002) thought it was likely that women are more often on multiple boards at a time. However, they
did not find proof of this.
The Norwegian situation is different than that of most other countries: in
Grosvold, Brammer and Rayton (2007) found for the years 2001‐2004 that although diversity among Norwegian board members has increased, board size has not changed. Thus, they suggest that female board members replace male board members instead of them being added to the board. However, this is the situation largely before the introduction of the gender equality law. Women were then gradually and with less pressure from the government added to the board of directors. After 2004, when the law first came into force for state‐owned companies and after 2005, when private limited companies were confronted with this law, the addition of women to boards may have increased at a higher pace than before. This might have led to a change in the way of adding women to the boards.
Hypothesis 5. The size of the board of directors of Norwegian companies has increased after the introduction of gender equality law.
4.6 Comparing female nonexecutive and executive directors
Hypothesis 6d. The age of female executive directors has changed in the same way as the background of female nonexecutive directors. Hypothesis 6e. The educational level of female executive directors has changed in the same way as the educational level of female nonexecutive directors. 4.7 Stateownership The gender equality law came into force for state‐owned companies in 2004, and for private limited companies in 2006. Many Norwegian companies in the Oslo Stock Exchange are partly owned by the state. In none of them the state has a majority stake. Consequently, state‐owned companies probably started to increase the share of female board members earlier and they might have had more women in the beginning already due to the fact that the government supported female participation in governmental committees already in the 1980s (Teigen, 2008a).
Hypothesis 7a. Companies with stateownership have increased their share of women in top management teams earlier than companies without stateownership. Hypothesis 7b. Companies with stateownership started with a greater share of female directors than companies without stateownership.
5. METHODOLOGY AND DATA 5.1 Research sample
Companies that have to conform to the law on gender equality, are Norwegian Public Limited Companies. In this research I have focused on the biggest Norwegian PLC’s listed on the Oslo Stock Exchange (OSE). I have focused on the biggest companies, because it is mandatory for these to make financial information and information regarding board composition publicly available.
In order to identify these companies, I have selected the biggest
Norwegian companies listed on the OSE with a market capitalization of over
2000 million Norwegian Kroner (MNOK), which is in Euros: €23.062.136,634.
Some companies are listed on the OSE, but are not Norwegian, like the
Acergy Group: this company has a Norwegian background, is listed on the OSE, but also listed in the UK and has its headquarters in Hammersmith (UK). This company does not have to comply with the law and was therefore excluded from
the research.
At the 2nd of March 2009, the number of companies with a market
capitalization of over 2000 MNOK was 48 (Oslo Børs, 2009). However, 9 of them were incorporated in other countries (Bermuda, Cyprus, UK, Sweden, Liberia and Cayman Islands), so the total number of companies in this research has become 39. The total list of companies in this research and their market capitalization
can be found in appendix 1.
7‐year data, from 2002 until 2008, was used to cover the whole period in
which the law influenced the companies.
Most Norwegian companies adopted a two‐tier system in their boards. However, the corporate governance code does not prohibit a one‐tier system. In this research II have focused both on executive and on non‐executive boards. Only two companies, Ganger Rolf and Bonheur, both belonging to the Fred Olsen
Group, adopted a one‐tier structure from 2002‐2007.
Norwegian companies with over 200 employees should have a board with
at least 12 members: two‐third of them chosen by shareholders, one‐third chosen by the employees (NCGB, 2007).
5.2 Data collection
Information about the members of top management teams was first found in the annual reports of the companies in this research. All of them are listed companies and are required to publish information about their board members. The corporate governance code of 2007 requires companies to publish information about age, education, work experience, assignments with other companies and/or organizations, additional work a board members has carried
out for the company, and board tenure (NCGB, 2007).
Most companies placed the annual reports for a large number of years on
their websites. However, there were differences between the companies: three companies started to exist in 2007 and therefore only annual reports from 2007 and 2008 were available, while 4 companies placed annual reports from 1994 until 2008 and 1 even started at 1992. Companies without all the required annual reports on their website were contacted by e‐mail and asked to send a
digital copy of the missing annual reports.
The final sample consisted of 39 companies and a total of 3376 top
management team members.
Although most of the more recent annual reports described the board members extensively, information about board members in older annual reports was scarcer. Therefore, if information in annual reports was not available, online
sources, such as Google Finance, (finance.google.com), Zoominfo
(www.zoominfo.com) and Amadeus (www.amadeus.bvdep.com), were used. Information about current board members of a company could also be found on corporate websites, under “investor relations” or “corporate governance”.
In Norway, companies with over 200 employees must have employee
5.3 Measurement
All information about board members was gathered in an SPSS spreadsheet. This spreadsheet consisted of 19 columns. See appendix 2 for the codebook that was used for collecting information about the board members. After all information about the board members was found, the information was consolidated per company per year in a second spreadsheet. Company specific information was added to this spreadsheet. See appendix 3 for the codebook that was used for filling this spreadsheet. 5.3.1 Gender Information about the gender of a board member was mainly retrieved from the annual reports of the companies, where almost all companies placed pictures of board members in the annual reports. If this had not happened, online sources were used to find information about the gender of the board member. 5.3.2 Year of birth The year of birth and not age of board members was used in the spreadsheet. If an annual report mentioned the age of the board members and not the year of birth, and information could not be retrieved from online sources, then age was subtracted from the year the annual report was published in. 5.3.3 Nationality
5.3.4 Education
Information about education of the board members could mostly be found in annual reports. Education proved to be most difficult to find for employee representatives. I classified the following degrees for education: Non, Bachelor’s degree, Master’s degree, MBA, PhD, and Other. For some board members their degree was mentioned in Norwegian. In that case, I looked up the international equivalent.
5.3.5 Background
Hillman et al (2002) found that male directors most often come from a business background, being a business expert, while women are more often than men
support specialists or community influentials. If someone is a business expert, he
or she has worked his whole career in business and is a senior manager of a large for‐profit company. Community influential’s provide companies with non‐ business perspectives on issues and they know how to deal with powerful groups in the community, they often come from for example universities or politics. Lastly, support specialists give expertise to the company in and access to
public relations, marketing, banking or law.
Annual reports mostly described the background of top management
team members, if this was not the case information was retrieved from online sources.
5.3.6 Board interlocks
Board interlocks has been measured as the number of boards a board member takes part in, other than the board of the company that was described. An interlock can be both a business interlock and a non‐business interlock. The difference between these is that the former refers to a directorship of other corporate boards, while the latter refers to directorships of noncorporate institutions (Bilimoria and Piderit, 1994). In this research, I used the total number of both business and non‐business interlocks on an individual level because both types of interlocks say something about the centrality of a company. For the network analysis I used the number of interlocks between the
The number of companies in this research differed per year: not all data was available in 2002 already. The number of annual reports available in 2002, was 26, in 2003 33, in 2004, 35, in 2005 and 2006, 36, and in 2007 and 2008, 39. To get an as large group as possible, I decided to exclude annual reports from 2002 from the network analysis. So, I made a network analysis for 33 companies for the years 2003 until 2008.
5.3.7 Denomination of board members
In order to find out what exactly was the position of female top management team members in comparison with male top management team members, I have distinguished between different denominations of TMT members. TMT members
can sit on either the executive or the non‐executive board.
In Norwegian non‐executive boards, a differentiation could be made
between a chairman or chairwomen, a deputy chair, regular board members and employee representatives. In executive boards there was more variation. I decided to divide between the company’s Chief Executive Officer, the Chief Financial Officer, the Chief Operational Officer, and other executives. Other executives could be vice presidents of certain business units, but also for example Chief Technical Officers, Chief Marketing Officers, etcetera.
5.3.8 State ownership
The percentage of state ownership was derived from data in the AMADEUS database.
5.3.9 Company sector
So, I defined the business elite to be individuals with decisional authority at the
summit of Norway’s biggest companies. I defined “biggest companies” as
Norwegian companies with a market capitalization of at least 2000 MNOK
(€23.062.136,63), which resulted in a list of 39 companies.
6. RESULTS 6.1 Descriptive results5
6.1.1 Gender
It is not a surprise that the gender equality law caused an increase in the percentage of female non‐executive directors. In 2002, 18,72% of the non‐ executive directors was female, compared to 81,28% male non‐executive directors. The percentage of female non‐executive directors increased to 37,21% in 2008, while the percentage of male non‐executives decreased to 62,79%. This means an increase in female non‐executive directors from 38 in 2002 to 112 in 2008 and an increase in male non‐executive directors from 165 in 2002 to 189 in 2008. These numbers refer to board positions, instead of individual directors:
some directors are occupying more than one board position.
Not only did the percentage of female non‐executive directors increase,
also the percentage of female executive directors increased: in 2002, 6,9% of executive directors was female. This increased to 15,59% in 2008. The percentage of male executive directors decreased from 93,1% in 2002 to 84,41% in 2008. This means an increase in female executive directors from 10 in 2002 to 41 in 2008. The number of male executive directors increased from 135 in 2002 to 222 in 2008. The precise figures for male and female directors from 2002 until
2008 can be found in table 1 and 2.
The absolute increase of male executive and non‐executive board
The increase of the female non‐executive directors started to accelerate after 2005, while the increase of the female executive directors started two years later, in 2007, as can be seen in figure 2 and table 3. In 2002, 26,92% of the companies did not have a female director in its TMT. The last company to include female TMT members in its TMT was Det Norske Oljeselskap in 2007.
Although the percentage of women in both the executive committee and the non‐ executive committee increased, the share of women among CEO’s, CFO’s, COO’s and non‐executive chairs still is smaller compared to the total percentage of women (See figure 3 and table 4). The only position that has increased almost as much as the total number of female directors, is the percentage of female non‐
executive deputy chairs.
In 2006, the first female CEO was appointed. The number of female CEO’s
6.1.2 Age of TMT members
The total number of top management team positions between 2002 and 2008 included in this research, is 3376. 21,2% of them are female, 78,8% of them are male. The oldest board member was born in 1929 (Mr. Fred Olsen, Chairman of the non‐executive board of Ganger Rolf and Bonheur from 2002‐2008), while the youngest board member was born in 1983 (Mrs. Britt Østby Fredriksen, Non‐
executive board member of Marine Harvest in 2008).
The oldest female board member is Mrs. Anne Cathrine Høeg Rasmussen,
who was born in 1936. She was a Non‐executive board member from 2002 until 2003 at Norsk Hydro. The youngest male board member is Are Gløersen, born in 1981 and employee representative in 2008 at Rec Group.
For 168 board members (4,95%), no year of birth was found. Female TMT members are younger than male TMT members (see figure 4 and 5 and table 5): they are on average 5 years younger than their male counterparts. The average age of male top management team members is 52, with a standard deviation of 8. The oldest board member is 71 and the youngest is 27. The average age of female top management team members is 47, with a standard deviation of 8. The
youngest top management team member is 24, the oldest 67.
Although women are better represented at the non‐executive board7, the
average age at this board is 5 years older than that of the executive board: 53 (standard deviation of 9) versus 48 (standard deviation 7). In the executive board, the age differences between men and women are smaller (45 versus 48 years old), compared to the non‐executive board (48 versus 55 years old).
7 75,6% of female top management team serves on the non‐executive board, 23,5% on the non‐
6.1.3 Industry
6.2 Testing Hypotheses
6.2.1 Nationality
On average 14% of the directors did not hold the Norwegian nationality: 13,94% of female TMT members does not hold the Norwegian nationality and 14,02% of male TMT members is foreign. The average number of foreign directors among the total business elite increased from 11,27% in 2002, to 14,26 in 2008. In 2006, the number of directors with a foreign nationality was highest: 15,35%.
The number of foreign directors increased both among female and among
male directors. The share of foreign directors among the females was 8,33% in 2002, and increased to 13,94% in 2008. In 2005 their number was highest: 16%. The share of male foreign directors was 11,74% in 2002, and increased to 14,39% in 2008, being highest in 2006 (15,53%). Both the group of female TMT members and the group of male TMT members saw a large increase between 2002 and 2003. In general there are only small differences between men and
women in the share of foreign TMT members.
As can be seen in the figure below (figure 7) and table 7, female directors
have not become more international than male directors. In 2002, the share of foreign female directors was lower than the share of foreign male directors, but after that year, the groups have developed in the same way. This means that
hypothesis 1 is not supported.
Between 2002 and 2003 a sudden increase in foreigners among female directors occurred. The percentage of foreign male directors increased as well, but not by as large figures as the percentage of foreign female directors. This might be explained by the fact that in the beginning of 2002 the former Secretary of State for Trade and Industry, Mr. Ansgar Gabrielsen, gave companies the chance to voluntarily increase the number of females in the boardroom in two years to 40%. Although companies failed to increase the figure to 40%, they did increase in that period. The companies in this research increased their share of female directors from 13,79% in 2002 to 16,6% in 2004. It seems that the first new
female directors were found more often abroad than before.
FIGURE 7 Percentage of male, female and total directors with a nonNorwegian nationality, 20022008 (see table 7) Although only few differences exist in the percentage of foreign top management teams members among men and women, differences do exist in their country of origin: the majority of female foreign TMT members are from Denmark (39,6%) and Sweden (29,7%). These countries are the country of origin of many foreign male TMT members as well, but their share is not as high as among women: 24,93% of male foreign TMT members has a Danish nationality, 18,08% a Swedish nationality. Men come from more different countries than women: besides Norwegian, male directors hold 19 different nationalities and female
directors 7 (see table 8).
Table 9 shows the percentage of foreign female directors between 2002
No differences were found when employee representatives were left out of the data. No data regarding background was found for 65 TMT members (1,93%), these cases were left out of the results.
6.2.3 Educational background
Both male and female board members were highly educated (see table 13 and 14 and figure 10, 11 and 12). In 2002, 85,71% of male board members had obtained a Master’s degree, MBA or PhD. This figure has slightly increased to 85,93% in 2008. Female board members started with an even higher figure: 94,44% had obtained a Master’s degree, MBA or PhD. However, this figure decreased to 86,86% in 2008. The figure decreased for both Master’s degrees and MBA’s, but more female TMT members possessed a PhD (2,78% in 2002, 2,92% in 2008). However, the peak in PhD’s among women was in 2004 (7,35%). In comparison with male TMT members, women more often have an MBA, but less often have a Master’s degree or PhD.
Therefore, hypothesis 3b is supported: the educational level of women has decreased over time. Hypothesis 3a states that the educational level of women is higher than that of men. In 2002, the educational level is indeed higher than that of men. Also, if we have a look at the average over the years 2002 until 2008, then the average educational level of women still is higher than that of men: 86,15% of male board members possesses a Master’s degree, MBA or PhD, while this is the case for 89,90% of female board members. So, support can be found
for hypothesis 3a as well.
Employee representatives and board members denominated as “others”
have not been taken into account for testing these hypothesis. This is due to the large number of missing values for both groups. The total percentage of missing values for education is 18,1%. However, missing values for employee representatives: is 56,4% (246). For TMT members denominated as “others”, even less information is available: for 80% (12) educational background is missing. If these groups had been included here, then both hypotheses would
have been supported as well.
FIGURE 12
MSc degree, MBA, PhD, male and female TMT members, 20022008
6.2.4 Interlocking directorates
When the average number of board positions outside the board position in the current company per gender category was calculated, I excluded employee representatives from the sample. The reason is that the average number of board positions for this group is much smaller than that of the rest of the sample. Employee representatives are regular employees that normally do not fulfil directorships in other companies. However, most of them do fulfil positions in, for instance, trade unions. These, mostly, non‐business interlocks make that the average number of directorships for male employee representatives is 0,359, and the average number of board positions for female employee representatives is 0,377. The average number of board positions for the other directors in the
samples is for males, 1,365 and for females, 2,732.
As we can see in figure 13 and table 15, the number of directorships per
an average of 3 directorships per TMT member. In this period companies had started to search for female directors. The number of experienced female directors still was small. Therefore, companies probably recruited the women
that had already served on a board of directors.
After 2006, the number of board positions per female board member
starts to decrease when governmental and private initiatives set up to train women to become board members and national databases for potential female directors were introduced (Professional Boards Forum, 2009c; Ministry of Children and Education, 2009). However, the average number of boards per female board member still is almost one more for female directors compared to male directors.
This means that hypothesis 4a is not supported: the number of boards per female board member has increased after 2002, but after 2006, it started to decrease again. The number of boards per male board member has not
decreased either: it increased.
FIGURE 13
Average number of extra board positions for male and female TMT members, employee representatives excluded, 20022008 (see table 15)
Figure 14 and table 16 demonstrates the percentage of male and female directors that are linking two or three or more companies. On average, women are linking more companies than men (12,56% of female directors link 2 or more companies compared to 3,39% of male directors), but the differences become smaller over time. In 2005, the percentage of female linkers is highest: 15%, after
that year the percentages shrink.
This figure is comparable with figure 11, where the largest numbers of
board memberships for women take place in the same period. In this period, the percentage of linkers and the number of board memberships is highest for women. After that it starts to decrease because more women have found their way to the top management teams and sufficient new women are available for
top management team positions.
On average 1,43% of women is a linker of 3 or more companies, this
counts for 0,15% of men. Only 1 director links 4 companies: Mrs. Grace Reksten Skaugen: in 2005, she is a director of StatoilHydro, Storebrand, Tandberg and Opera.
FIGURE 14
Male and female linkers of 2 companies and of 3+ companies, 20032008 (see table 16)
