May 2016

Last November, when Canada’s newly elected Prime Minister Justin Trudeau introduced his country’s first gender-balanced cabinet in history, he was asked by a reporter at the swearing-in ceremony why gender parity was important to him. To which, the Prime Minister tersely responded with his now widely quoted statement, “Because it’s 2015.”

The Prime Minister’s appointment of “a cabinet that looks like Canada” attracted international attention. And his succinct explanation for the importance of parity – more than just an effective sound bite – was a signal that the new government was serious about taking an active role in achieving representation and diversity in positions of leadership. The implied message being: it was time.

While the ministerial appointments were widely hailed – with more than 71 percent of Canadians approving of the gender-balanced cabinet1 – it also gave rise to dissenting voices who argued that this calculated approach diminished the principles and ideals of a meritocracy. According to this line of argument, the only objective way to evaluate people is based on their ability and effort, without regard for gender, race, sexuality or other considerations. And if people were only considered based on merit, there would be no need for diversity policies.

But the counter to this argument is that, without active policies to address gender diversity, we continue to see wide under-representation in positions of leadership, particularly in the C-suites and boardrooms of the corporate world. Today in the United States for example, when women make up 57 percent of the labour force,2 one would expect to see a greater proportion of female directors, if a meritocratic system were truly and objectively being implemented. Yet, women today hold only 19.2 percent of the board seats of S&P companies, according to Catalyst, a nonprofit organization focused on advancing women in the workplace.3 In Europe, women account for 20.2 percent of board members of the EU’s largest publicly listed companies.4 Japan fares even worse, with only 3.1 percent of board seats held by women.5

If the ideal is to adhere to meritocratic principles, those ideals do not currently bear out in the realities of today’s boardrooms. But more than that, there is evidence to suggest that the notion of meritocracy, in practice, can actually lead to the opposite outcome. Studies have shown that merit-based practices can often result in greater inequality by creating the structural conditions for bias. In his research, Emilio J. Castilla, a professor at MIT’s Sloan School of Management, has shown that employers can consciously or unconsciously discount the performance of employees based on their gender, race or nationality, when all other factors are equal. The result of which is that women and minorities needed to work harder to achieve salary increases equal to white men.6

In a series of experimental studies, Castilla, and his colleague Stephen Benard, a Professor at Indiana University, created a fictitious company called ServiceOne, and asked participants with management experience to evaluate small groups of male and female employees based on their performance. What the researchers found was that participants in the meritocratic system tended to favour men over equally qualified female employees when making decisions on compensation. By contrast, the participants in a non-meritocratic system did not exhibit bias in favour of the male employees.7 According to the researchers, the studies suggest that organizational cultures with a strong belief in meritocracy can unintentionally make bias more likely in these organizations, as managers fail to closely examine their behaviours for signs of prejudice.

The fallacy of meritocracy sheds light on the importance of taking active measures to achieve real progress on diversity and gender equality. Measures such as quota policies and legislation, while often controversial, have proven to move the needle more so than the slow pace of voluntary efforts to achieve these goals.

In the past decade, a number of countries around the world, most notably in Europe, have taken steps to legislate quotas for women directors on corporate boards. Countries including Belgium, France, Iceland, Italy, Norway, Spain and the Netherlands have all enacted legislation mandating a minimum percentage of female board members.

In 2003, Norway was the first country to pass such a law, requiring publicly traded companies to have at least 40 percent female representation on their boards, and stipulating harsh sanctions for non-compliance including de-listing. The law has been in place since 2006, and while the legislation initially encountered significant resistance (384 of the 563 public companies went private to avoid compliance), the quota law proved to be successful in reaching its goal of 40 percent female directors, and the policy is now widely accepted.8 While Norway’s quota law was successfully implemented, in reality, it took the pressure of sanctions to trigger the fundamental change. During the initial grace period, when no sanctions were in place, companies did not voluntarily implement the policy.

The Norwegian quota law is now widely considered a non-issue in that country. But it should also be noted that it is not a panacea for the issue of gender representation. Eight years after Norway introduced the law on gender equality in boardrooms, only two percent of the managing directors/CEOs of companies on the Oslo Stock Exchange were women.9 And within boards, only five percent of chairs were women.10 What the Norwegian experience – and those of other countries – show is that quotas can only push gender equality so far.

So what more can be done to support and accelerate the advancement of women into positions of influence and leadership? For starters, this objective should begin from the top. Company leaders set the tone for an organization’s culture. Programs receive more focus when senior leaders are personally involved and accountable for the outcome. CEOs, especially men, can send a powerful message when they actively demonstrate their commitment to gender diversity and inclusion.

At the recent World Economic Forum meeting in Davos, Switzerland, Canada’s Prime Minister Justin Trudeau, speaking on a panel, addressed the important role that men had to play in achieving a solution to the problem of gender parity. He spoke of his own experience in seeking to appoint a cabinet with an equal number of men and women, and how his party had to do a lot of initial legwork to encourage women to run for Parliament. And taking aim at those who questioned his choices, or argued that the ministerial appointments should be based solely on merit, Trudeau pointedly asserted, “Once I displayed the cabinet, nobody talked about merit anymore because the people in our cabinet, men and women, are extraordinarily highly qualified.”

While legislation can begin to lower the barriers to gender representation on boards, the most important initiatives to advance gender equality must come from within an organization – and that change starts at the top. As Prime Minister Trudeau stated on the Davos panel, “There’s a lot of hard work to do and the first part is recognizing it.”

1 Forum Research. Trudeau approval soars: Gender balanced cabinet very popular. Web. 11 November 2015. http://poll.forumresearch.com/post/2424/gender-balanced- cabinet-very-popular/

2 U.S. Bureau of Labor Statistics. Current Population Survey. Web. 2014. http://www.bls.gov/cps/cpsaat03.htm

3 Catalyst. 2014 Catalyst Census: Women Board Directors. New York: Catalyst, 2015.

4 European Commission. Gender balance in decision-making positions. Web. 21 July 2015. http://ec.europa.eu/justice/gender-equality/gender- decision-making/index_en.htm

5 Catalyst. 2014 Catalyst Census: Women Board Directors. New York: Catalyst, 2015.

<sup6 Castilla, Emilio J., and Stephen Benard. “The Paradox of Meritocracy in Organizations.” Administrative Science Quarterly 55 (2010): 543-576. © 2010 by Johnson Graduate School, Cornell University.

7 Castilla, Emilio J., and Stephen Benard. “The Paradox of Meritocracy in Organizations.” Administrative Science Quarterly 55 (2010): 543-576. © 2010 by Johnson Graduate School, Cornell University.

8 Storvik, Aagoth, Mari Teigen. Women on Board: The Norwegian Experience. Berlin: Friedrich-Ebert-Stiftung International Policy Analysis, 2010.

9 Storvik, Aagoth, Mari Teigen. Women on Board: The Norwegian Experience. Berlin: Friedrich-Ebert-Stiftung International Policy Analysis, 2010.

10 Storvik, Aagoth, Mari Teigen. Women on Board: The Norwegian Experience. Berlin: Friedrich-Ebert-Stiftung International Policy Analysis, 2010.