Varied Legal and Cultural Issues Affect the Number of Women in Leadership Roles Around the World

December 6, 2019

By Cindy Schipani

Key takeaways:

Quotas may be the most effective way to encourage gender diversity in business leadership, but they are not a viable solution in the U.S.

Disclosure laws could improve gender diversity, as could more direct action by individual companies to improve their own records.

Efforts to improve the proportion of women in corporate leadership require varied strategies across varied cultures, according to a new paper.

Writing in the Michigan Journal of Gender & Law, Michigan Ross Professor Cindy Schipani and colleagues compared the prevalence of women in corporate leadership in the U.S., Europe, and Japan. They found very different challenges and degrees of success in the three cultures.

While gender diversity has been linked to better financial performance for companies, men still dominate business leadership — boards and upper management — in the U.S. and most other countries. According to research cited in the paper, as of 2017, women held just over 20 percent of board seats across the Fortune 1000. The share of senior management roles held by women in 2018 was 21 percent in North America, a slight drop from the previous year. 

“The evidence keeps building that businesses with gender-diverse leadership tend to be more profitable on various metrics,” Schipani said in a recent interview. “The disappointing fact is that there are still so few women in the very highest ranks.”

Of the three regions studied in the paper, Japanese women face the toughest challenges due to ingrained cultural factors, Schipani said. The U.S. falls somewhere in the middle. The European Union showed the most gender diversity, thanks largely to strict quota systems in many countries.

Such quotas would not generally be legal in the U.S., and the typical substitute — affirmative action — is flawed, Schipani said: “There’s nothing mandatory about it, and then there’s a lot of backlash from it as well. The courts have allowed affirmative action if there’s a history of past discrimination, and if it’s meant to be a temporary plan until the numbers are rectified. So it’s never been meant to be all-encompassing.”

Schipani and her colleagues — Bettina Binder of the Pforzheim University; Terry Morehead Dworkin of Indiana University – Bloomington (Emerita) and Seattle University; Niculina Nae of the Nagoya University of Commerce and Business; and Irina Averianova of the Nagoya University of Commerce and Business — identified possible strategies to improve corporate gender diversity in the U.S.:

  • Requiring companies to disclose their information on gender diversity and explain any shortfalls. Finland has made substantial progress with this approach, and it avoids the U.S. legal issues with quotas.
  • Setting gender goals by individual companies. Businesses can set standards for themselves that government in the U.S. cannot.
  •  Taking other actions within companies, such as setting up training and mentoring programs for women, or bringing in an outside consultant to help deal with any implicit gender bias that might be present in the company culture.

Schipani also noted one development in the U.S. worth watching: a new law in California requiring a certain number of women on boards of companies that are based in the state. The law is structured so that companies can meet the requirement by increasing the size of their boards, so no one necessarily has to lose a seat. That could help the law survive legal challenges, she said. 

Outside the U.S., Schipani said, E.U. countries would do well to continue their current quota-based approach, as it’s proving to be effective. In Japan, increasing gender diversity will likely be a tougher challenge, requiring a major shift in culture and attitude along with new legal requirements.

Cindy Schipani is the Merwin H. Waterman Collegiate Professor of Business Administration and Professor of Business Law at the University of Michigan Ross School of Business.

Click here to read this piece on the Michigan Ross website.