Reshaping Boardrooms: Research on Gender Quotas

Business men_pexels_Thorburn_Eckbo_Sfolkestad
The debate around board gender quotas in Norway was marked by a clash of ideologies, economic arguments, and differing views on gender equality. Research conducted by NHH Professor Karin S. Thorburn, alongside Professor B. Espen Eckbo and Knut Nygaard examined whether this the implementation of the reform lowered firm value. Photo: Sigrid Folkestad (illustration image by pexels)
By Sigrid Folkestad

19 June 2024 14:09

Reshaping Boardrooms: Research on Gender Quotas

In 2005, Norway became the first country to mandate gender-balanced corporate boards. The quota reform was followed by criticism, but two studies by B. Espen Eckbo, Knut Nygaard, and Karin Thorburn challenged the prevailing narrative around the cost of the reform.

2025 marks the 20th anniversary of a landmark moment in corporate governance: Norway's mandating of gender quotas for corporate boards, with at least 40 percent of directors from each gender.

This move made Norway the first country in the world to legislate gender balance within the boardrooms of its corporations, and where a failure to comply was associated with a serious penalty.

The policy was initially met with skepticism.

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Clash of ideologies

The debate around board gender quotas in Norway was marked by a clash of ideologies, economic arguments, and differing views on gender equality. While some politicians and business leaders opposed the quota on the grounds of meritocracy and business autonomy, others saw it as a necessary step towards achieving gender parity and enhancing corporate governance.

There was criticism of the quota reform introduced in Norway even in the years that followed. Some argued that if board members are selected based on fulfilling gender quotas rather than purely on merit, qualifications, or relevant experience, it could lead to less effective decision-making and governance at the top levels of the company.

This, they argued, could impact the company's performance and competitiveness in the market.


Critical foundation

But, research conducted by NHH Professor Karin S. Thorburn, alongside Professor B. Espen Eckbo - both at the Department of Finance - and Knut Nygaard, examined whether this shock lowered firm value. The Norwegian quasi-experiment permitted the identification of causal effects that are rare in corporate governance research.

The paper Valuation Effects of Norway's Board Gender-Quota Law Revisited was published in Management Science in 2021, followed by Does Mandatory Board Gender-Balancing Reduce Firm Value?, published in Harvard Business Law Review in 2022.

The three researchers unravel the nuances of the gender quota's impact on Norwegian companies and provide a critical foundation for understanding the potential impacts of such policies. It challenged the prevailing narrative around the cost of gender quotas and provided a robust counterargument to skeptics of such policies.

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  • Contrary to prior research, their robust performance estimates, which correct econometric flaws in the extant literature, fail to reject an overall value-neutral effect of the quota, even for firms with all-male boards.
  • They also show that firms did not increase board size (to retain key male directors), and the boards did not significantly lose CEO experience.
  • Firms did not change their legal form to avoid the quota.
  • They conclude that investors and firms alike viewed the quota as a relatively low-cost constraint.

Debate and change in Sweden and the US

As a result of their research, Professor Thorburn was invited to the Swedish Ministry of Employment to discuss the new evidence, and she participated in the debate on board gender quotas in Sweden. The Swedish government put forward a proposal on board gender quotas in the Fall of 2016. The debates and policy formations around gender quotas in Sweden drew upon empirical findings from Norway's experience, given the close cultural and economic ties between the two countries and the pioneering nature of Norway's legislation. The proposal was, however, rejected by the other parties.

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Then, in 2021, Nasdaq adopted new rules on female representation, requiring that the Boards of Directors of firms listed on Nasdaq should have at least one female director – or explain why they didn’t comply. During the preparatory work, Professor Karin Thorburn had discussions with Nasdaq’s General Counsel. In addition, she and her coauthors held presentations at multiple academic and practitioner conferences in the US, besides blogs and interviews in reputable media.

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While some studies have indicated that this caused a decline in company performance and reduced shareholder wealth – and that some companies chose to go private rather than comply with the Norway board diversity mandate, they add, pointing to the study by Eckbo, Nyaard, and Thorburn:

"A more recent study, however, questions the statistical significance of these findings."

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The findings from Eckbo, Nygaard, and Thorburn's work underscore the importance of grounding such debates in rigorous academic research to anticipate and understand the multifaceted impacts of these policies.