The glass ceiling has proven hard to crack. Despite decades of concerted efforts to increase female representation at the executive level, women still hold less than 30 percent of C-suite positions in the United States.
Starting with Norway in 2005, several European countries responded to their own corporate leadership gap by passing laws establishing minimum gender quotas for company boards. The hope was for a positive trickle-down effect, where female board members could boost women’s careers at both senior and lower levels through hiring decisions and corporate policies.
Yet despite early evidence for this phenomenon, researchers David Matsa and Amalia Miller recently found that the European quota laws haven’t had their desired effect.
“We found that when a U.S. board became more diverse, it was more likely to add a woman to the executive team,” says Matsa, Alan E. Peterson Distinguished Professor of Finance at Kellogg. “But when European countries have enacted board quotas, spillovers into executives haven’t followed.”
Indeed, some countries are already trying more-aggressive policies. In 2021, Germany passed a law requiring large, public companies to have at least one woman on their executive team. New research by Matsa and Miller finds that this more-direct intervention was better at elevating women to the C-suite—but without the downstream effects that policymakers desired.
“What we’re finding is that in response to these new mandates, women are put into this team of executives, but it doesn’t necessarily change other hiring practices in the companies very much,” Matsa says.
Seeking top-down change
Over the last two decades, both government policy and investor campaigns have sought to solve the executive gender imbalance from the top down. In 2005, a Norwegian law required corporate boards to be at least 40 percent female, eventually inspiring similar rules across the European Union. Female representation on U.S. boards also grew rapidly in the 21st century, due in part to pressure from large institutional investors like Vanguard, BlackRock, and State Street.
But initial optimism that these requirements would translate into more female leaders did not materialize. In their analysis of European public companies from 1999 to 2023, Matsa and Miller found that gender quotas for corporate boards led to a 20 percent increase in the number of female board members but had a minimal effect on the number of female senior executives or senior managers.
“The broader goal of those policies was presumably not just to change those particular companies at the board level but to spur changes throughout those organizations that would cascade throughout the economy,” Matsa says. “And that doesn’t seem to have happened.”
Diversity without disruption
A second Matsa and Miller study examined a German law enacted in 2021 that requires publicly traded companies with more than 2,000 employees and a management team of at least four members to have at least one female executive. Companies didn’t have to make the change immediately, but if a position on an otherwise all-male team opened up, the company was required to appoint a woman to the role.
“The law was both remarkably interventionist and cautious at the same time,” Matsa says. Unlike a board of directors, which meets periodically to oversee management and major strategic decisions, the executive team is charged with running the company on an ongoing basis.
But the very narrow eligibility rules—only about 65 German companies met the criteria—and minimum requirement of one female executive per company made it less radical, he says. Two-thirds of the targeted companies were already in compliance with the new law when it passed.
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Still, the law’s effect on female executive share was significant. By 2023, the percentage of companies with at least one female executive increased from 67 percent to 87 percent. And the overall proportion of women in executive positions at these companies increased by two-thirds, from 9 percent to 15 percent.
In addition, companies didn’t have to compromise on quality to meet these requirements, the researchers found. Women hired after the law went into effect were just as experienced as alternative male hires; many of the women came from leadership roles at private or smaller companies. Women were often hired from outside the company instead of promoted from within, but not at an elevated rate over male executives hired in the same period.
And companies that were mandated to make female hires didn’t differ from comparable companies on profitability, stock price, or other business outcomes during the study period.
“There are qualified women who are able to take these positions,” Matsa says. “With respect to their characteristics that we can observe, it’s not that they’re better than the men or worse than the men. They seem to be equivalent.”
A contained ripple
Despite the overall gains, the researchers did not find any effect on female hiring for the top executive roles of CEO, CFO, or COO. Instead, most of the new female executives assumed roles responsible for human resources and labor relations, both of which had already had higher female representation before the law was enacted.
But companies weren’t just adding a “token” female to their executive team either. The researchers found little evidence that German firms were bending the rules by simply enlarging their executive team to include those HR or labor leadership positions. (In fact, two companies, clothier Hugo Boss and healthcare company Rhön-klinikum AG, actually reduced their executive team size to three, evading the requirement.)
“Companies weren’t complying by changing the CEO,” Matsa says. “But the optimistic interpretation could be that maybe once women are in these less-central roles on the team, they will grow into having the central roles organically.”
The analysis also found no significant downstream effects of adding more female executives. There was no increase in female representation among managers and no expansion of corporate initiatives addressing gender inequality, such as action plans for decreasing gender pay gaps, new flexible work policies, or employee resource groups for women.
“Someone might be skeptical about whether an employee resource group for women is effective or could change the company, but it would be easy to implement,” Matsa says. “And we don’t find that the companies that are affected by this quota are more likely to form one of those groups.”
The overall effect, Matsa and Miller write, is “diversity without disruption”—a reassuring message for a company’s bottom line, but maybe a disappointing one for deeper structural change to close the executive gender gap. In time, the researchers are interested in examining longer-term effects in Germany, as well as how executive quotas pan out in countries such as France, which adopted a similar law in 2021.
“The biggest thing we’re watching is whether these policies are adopted elsewhere,” Matsa says. “And then to understand, in other settings, do we see the same results or something different, and try to understand why.”