The Norwegian government has introduced a quota for women’s representation on the boards of large- and mid-sized private firms – the first of its kind globally.
The proposed bill will require private firms with a minimum of 30 employees and yearly revenues above 50m kroner ($4.7m) to have at least 40% of their board members be women. Norway has historically been a trailblazer for improving gender parity in companies. In 2005, it was the first European country to require listed companies to have boards with at least 40% female representation.
Norway has been a step ahead of other countries in enacting laws to improve gender equality more broadly.
In OMFIF’s Gender Balance Index, which measures gender parity in financial institutions at senior staff levels across the financial sector, Norges Bank is the best performing central bank in Europe. It ranked 9th out of 186 central banks included in the index, with a score of 84. The score remained unchanged from 2022 when Ida Wolden Bach became the first female governor of the bank in its 108-year history.
In comparison, none of the national central banks of European Union member countries scored higher than 70. The European Central Bank scored 71. In the non-EU countries in Europe, the National Bank of Serbia scored 82 and the Central Bank of Iceland had a score of 76, rounding out the top three central banks in Europe.
While the GBI only tracks gender balance at senior staff levels, Norges Bank has an internal objective for women to make up 40% of all staff members. But according to its 2022 annual report, the bank falls short of this objective. The share of women on permanent staff at the end of 2022 was 35%, only a percentage point higher than 34% at the end of 2021.
Norwegian sovereign funds and pension funds also performed relatively well in the GBI. Norges Bank Investment Management scored 59 and ranked 9th out of 50 sovereign funds. Kommunal Landspensjonskasse, which is the only Norwegian pension fund included in the index, scored 65 and ranked 15th among the 50 largest funds.
Others are catching up
While Norway is a step ahead in extending the 40% mandate to unlisted companies, female representation at the board level is coming into sharper focus for policy-makers in other jurisdictions. The European Commission and the Financial Conduct Authority in the UK both introduced measures to improve gender balance at the board level in companies in 2022.
In November 2022, the European Parliament formally adopted a law related to gender quotas on company boards. The law, which had been 10 years in the making, requires companies in member countries to have women making up 40% of non-executive directors, or 33% of all directors by June 2026.
While the directive is aimed at the corporate sector, countries are adopting similar measures for public institutions. Germany passed a law in 2022 mandating that half of all managers in the federal public service, including the Bundesbank, should be female. In Spain, there is a proposed bill to extend the law to the cabinet, professional associations and candidate lists.
The FCA amended its diversity and inclusion policy last year to require UK-listed firms to disclose information regarding the gender and ethnic make-up of their boards and executive teams. Listed firms are now mandated to disclose on a comply-or-explain basis against two gender-related targets: having at least 40% women on their board and at least one female senior board position, such as chair, chief executive officer or chief financial officer.
Going beyond the board
While the measures and policies to improve gender representation at the board level is a welcome move, it often falls short of the mark to improve gender parity within an industry. Policies from the EU, the UK and even Norway do not focus on gender equality at the executive level, where female representation is lagging.
This is especially the case when looking at commercial banks. Of the 50 banks included in the GBI, only 35% of board members are women. In the same sample, only 26% of executive committee members are women.
There is also a disparity in the types of roles women have in ExCos. The GBI found that 62% of women hold revenue-generating roles (such as CEO or CFO) compared to 83% of men in similar positions. In contrast, 38% of women are in administrative or internal-facing roles (such as internal audit or human resources), which is more than double the proportion of men in such roles. The type of role matters as it is more likely that future leaders are chosen from the former category, signalling a problem in the pipeline for female leaders.
The benefits of a more diverse, gender-balanced work force are well documented. Experts from the financial industry who were interviewed for the GBI highlighted the positive effects of gender balance in financial institutions. They noted that gender inclusion can lead to higher returns, less risk, greater impact, better products and better results.
While increased scrutiny and mandates for gender parity at the board level is a much-needed positive step, similar actions need to be taken to break through barriers in other senior staff positions.
Arunima Sharan is Senior Research Analyst at OMFIF.
OMFIF’s Sustainable Policy Institute is hosting a roundtable on 29 August, Empowering change: promoting gender balance in financial institutions. Register to attend here.