Are quotas for women a good idea for business?

Does the US need a quota requirement for the number of women executives in businesses? The financial crisis, as many are coming to realize (including Timothy Geithner himself), was mostly the handiwork of men. The CEOs of all the financial firms that brought the economy down were men. The top regulators who missed the bubble’s signs—Alan Greenspan, Ben Bernanke, etc.—were men. A majority of the traders themselves, at every level of crafting the mortgage-backed securities, were men. And it appears women are the ones now stepping in to clean up the mess. Time Magazine just ran a cover story on the “New Sheriffs of Wall Street”: Elizabeth Warren, a vocal supporter of a consumer protection agency and chair of the Congressional Oversight Panel investigating the TARP program, Sheila Bair, the chair of the FDIC, who was one of the first regulators to raise concerns about a deflating bubble, and Mary Shapiro, chair of the SEC, who cast the deciding vote to go after Goldman Sachs.

It isn’t shocking that the US has dismal numbers to report on the female percentage of executives and board members. Only three percent of Fortune 500 companies have a woman as CEO and about 15% of those companies’ board members are women. Meanwhile, Norway has enacted a law requiring that 40% of all company board members be women. There, more than 25% of board seats at the 65 largest privately held companies are occupied by women. The percentage of female directors overall is above 40%. Back in 2002, when the law was enacted, women held less than seven percent of private-sector board seats.

These two facts taken together must point to a strong argument for quotas—more women will serve in high-level positions, and the world will be better of for it. Everyone wins. Except that the story is more complicated than that.

The issue skirts the question of whether or not the premise itself, that men were in charge of the financial meltdown, is sexist. Dana Goldstein and Ann Friedman, two editors at The American Prospect, tackle this question in their “Ask a feminist” video series. They conclude that while it is sexist to say that men caused the financial crisis, it is not sexist to say that the “hyper-masculine culture of Wall Street” was a factor.

But they make a passing remark that raises something even more troubling. They point to Erin Callan and Zoe Cruz , two high-ranking executives at Lehman Brothers and Morgan Stanley, respectively, as women who “saw their careers end because they were not skeptical enough of the mortgage crisis.” In other words, exceptions—women who were involved in the financial crisis alongside men. But in reality, both of these women are widely assumed to have served as scapegoats for their (male) bosses as the market began to recede--they were pushed off the “glass cliff.” Their firings only serve to enhance the sense that Wall Street is a good old boy’s club and a male-dominated realm. If hiring women can be used as an easy cover, why would a quota system change that motive for promoting them?

The story in Norway is similar to Callan and Cruz’s. The women who were named to boards to fill the quota were overall younger and more inexperienced. The pool from which to pick was less robust than the pool of men—likely because of the long-standing practice of excluding women from the roles that precede the promotions. Theoretically, over time this would change. But in the meantime, it may pose a hurdle for these women. “When you suddenly replace 30 percent to 40 percent of your board with inexperienced people, it is easier for those new members to be manipulated—that’s just common sense,” said Ruilf Rustad, a professional investor who has been chairman of at least 20 listed companies over the past 10 years.

And while all of this is going on, the number of female executives has not risen along with the number of women in boardrooms. A recent study also found that gender quotas for women in government don’t result in more women being politically engaged. While researchers expected that more women representatives would lead to greater involvement, not much has changed. This, at least for now, discounts the idea that a rising tide lifts all ships. The domino effect may not happen automatically.

Women are also often the first to speak up against wrong doing because they are outsiders. Time Magazine’s “Persons of the Year” in 2002 were three women (in a similar pose on the cover as the New Sheriffs): Cynthia Cooper of Worldcom, Colleen Rowley of the FBI, and Sherron Watkins of Enron. Three women who spoke up; three women on the outside looking in at the wrongdoings. It is likely that women are risk-adverse also because they are outsiders: if it took more for you to get your job than your male counterpart, you are less inclined to risk losing it. They often play by the rules because their jobs are more tenuous. But if more women become executives, or insiders, do these effects remain?

In a New York Times op-ed, French Minister of Economic Affairs, Industry and Employment Christine Lagarde joined in to point out that women were not at the helm of the financial crisis. Perhaps they should be, she says; after all, “When women are called to action in times of turbulence, it is often on account of their composure, sense of responsibility and great pragmatism in delicate situations.” But the picture Lagarde paints here smacks of women that are fresh from finishing school. Is it because women are more “composed” that they would have done a better job? She attributes her own personal success to stronger characteristics: discipline, the meaning of hard work, willpower. But many men have these traits as well. Just what it is about women that would have made us better able to avoid the financial crisis? Answering that question leads us dangerously close to boiling women down to essential traits.

Quotas also make feminism what Ariel Levy at The New Yorker calls a “politics of identity,” instead of a “politics of liberation.” The game changes from promoting certain values–and along with them, women who espouse them into higher office–to simply putting more women in more positions of power, no matter what values they hold. “You could have, for example…Sarah Palin.” Levy admits, as do I, that it matters that there are more women in powerful roles than there were in prior years. But to be preoccupied with a game of getting “a bigger slice of the resources” doesn’t serve a larger feminist agenda. Women become interchangeable.

There is something to be said for the fact that having more women in high positions probably means that they will both make their colleagues more comfortable with the idea and create an easier path for women who come after them. Diversity is important, if nothing else for the sake of bringing diverse ideas to the table. And it is highly likely that the more women in a firm, over more time, the less they will experience the glass cliff. Would a strict quota bring them in too quickly? It’s possible. And it’s also possible that too many women will then be promoted for the wrong reasons. And either way, it is hard to avoid characterizing all women in certain essential ways when arguing that they are necessary for business. Saying that having women in charge means better performance begs the question, why? And that question has yet to be answered.

Levy has a different solution: federal assurance that all women have access to affordable childcare. Rather than require companies to hire a certain number of women, give them an affordable place to leave their kids. This way the choice between a career and having a family disappears. And if you don’t have to interrupt your career path for bearing children, perhaps you can advance at the same pace, and in the same positions, as men. -Bryce Covert

Bryce Covert is a journalist and blogger who writes on feminism, politics and the energy industry. She has a B.A. in literature from Brown University and you can find her at www.brycecovert.com and www.twitter.com/brycecovert .