Janet Yellen made history this week. The new head of the U.S. Federal Reserve – the most powerful central banker in the world – is a woman. This is really cool. It’s a big sign that merit is increasingly gender blind. Ms. Yellen (who says she wishes to be called chair, not chairman), along with German Chancellor Angela Merkel and IMF managing director Christine Lagarde, are the most awesome female threesome on the planet. You go, girls!
But are women rejoicing? No, they’re not. Ms. Yellen’s appointment unleashed yet another torrent of complaints from elite women about how unfair the world is to women like themselves. Where are all the other important female economists? they wanted to know.
“Economics is too powerful a discipline to be exercised only by men,” wrote Sherry Cooper, who spent many years as the most famous economist in Canada. Ms. Cooper groused that after all this time, just 32 per cent of economics PhDs are earned by women. In undergraduate economics courses, men tend to outnumber women by more than 2 to 1.
What accounts for this persistent gender gap? Many factors have been cited, including female students’ irrational fear that they’re no good in math (even though they are at least as good as men). But the main reason, almost never mentioned, is that a lot of women just aren’t that interested. No matter how hard you try to get them cranked up over economics, they’d rather go to teacher’s college.
Personally, I think primary school teaching is too powerful a discipline to be left only to women. But that’s a subject for another day.
Thankfully, no one has yet suggested gender quotas for economists. But “pink” quotas for corporate boards of directors are all the rage. A French law already requires boards to be at least 20 per cent female, soon to be 40 per cent. Belgium, Spain, Norway, Italy and Germany have quotas too. (Ms. Merkel was opposed, but reluctantly gave in.)
The drive to get more women onto boards has become a lucrative mini-industry, fuelled by enthusiastic lobbyists and giant search firms.
Everybody solemnly swears that companies with women on the board perform better than companies without, as if the mere presence of estrogen in the room automatically makes everything better. Sadly, the evidence for this is scant. In Norway, which introduced a 40-per-cent quota for women on boards, companies that had to recruit more women actually did worse, according to a 2010 study. That’s because most of the women available were significantly younger and less qualified than the men. Board performance suffered, and corporate performance did too.
“Boards are chosen in order to increase shareholder wealth,” said Amy Dittmar, a professor of finance at the University of Michigan who co-authored the study. “Placing restrictions on the composition of a board will reduce value.”
In other words, the problem isn’t gender. Women who are as experienced as men will perform just as well. The problem is the quotas.
European companies aren’t stupid. To meet their quotas, they are desperately trying to recruit women from the United States, which has the world’s most impressive supply of senior female executives, despite the absence of board quotas.
Here in Canada, we don’t believe in quotas. We believe in “targets,” a soft and squishy form of persuasion that is meant to name and shame laggards. The securities regulator will now require companies to voluntarily adopt targets for women on boards and in senior management, or explain why not.
Many companies remain far from perfect in their efforts to nurture and promote women. But I don’t think that gender balance is the most pressing issue facing corporate governance today, or that the presence of more women at the top of the financial world would have prevented a global meltdown, as some have argued. I also don’t think the purpose of a business is to advance social justice. Its purpose is to do a good job for its shareholders. After all, they’re the ones who own it.
It’s only smart to have a variety of backgrounds, talents and perspectives at the top of any business. But the soft tyranny of affirmative action drives me nuts. You wind up with tokenism or worse. To avoid the quotas, many Norwegian companies took evasive action by registering abroad or going private. And the artificial elevation of women to boards does nothing to improve the position of women in other senior corporate roles.
The best role models for women aren’t tokens. They’re women like Ms. Yellen, Ms. Merkel and Ms. Lagarde, who got where they are because they’re really good. Ultimately, their gender is irrelevant. The only thing that matters is how well they do the job. And that’s the way it should be.