Italian Lesson About Getting Women on the Board Five Years After the Implementation of the Gender Quota Law
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Corporate Ownership & Control / Volume 16, Issue 1, Autumn 2018, Continued - 1 ITALIAN LESSON ABOUT GETTING WOMEN ON THE BOARD FIVE YEARS AFTER THE IMPLEMENTATION OF THE GENDER QUOTA LAW Patrizia Pastore * * University of Calabria, Italy Contact details: Department of Business Administration and Law, University of Calabria, Ponte P. Bucci – Cubo 3C, 87036, Arcavacata di Rende, Cosenza, Italy Abstract How to cite this paper: Pastore, P. The gender quota Law No.120 of 12 July 2011 is the first example (2018). Italian lesson about getting of affirmative gender action in Italian company law. This women on the board five years after the implementation of the gender quota law. revolutionary Act has shown its effectiveness as well as its direct Corporate Ownership & Control, 16(1-1), and indirect effects. In the first five years of its enforcement, Italy 185-202. has achieved better results than expected: the number of board http://doi.org/10.22495/cocv16i1c1art7 seats held by women has increased so significantly as to allow Italy to exceed the European average and to posit itself among the Copyright © 2018 The Authors best European practices. However, the gender quotas imposed by This work is licensed under the Creative law led to an excessive concentration of positions on a few women Commons Attribution-NonCommercial (similarly to male colleagues): that is, the expected increase in the 4.0 International License (CC BY-NC 4.0). number of women who have access to boards has not been http://creativecommons.org/licenses/by -nc/4.0/ registered, since the same women are nominated in multiple positions. This circumstance requires shifting attention from ISSN Online: 1810-3057 simple numbers (how many women on boards) to merit (which ISSN Print: 1727-9232 women on boards) and the possibility of giving visibility and Received: 10.10.2018 opportunities to excellent and prepared women, able to express Accepted: 14.01.2019 added value in terms of skills, style of leadership, management culture and relationship. Moreover, reasonably, for a more reliable JEL Classification: G3, J16, J78, assessment of the Italian gender quota Law, and its impact in K2, M14 terms of corporate governance quality and financial performance, DOI: 10.22495/cocv16i1c1art7 an appropriate period of implementation is needed to assess its long-term effectiveness, when the compulsory gender quotas have ceased and to verify whether they actually led the companies to proceed spontaneously and with conviction in this direction, and not to avoid penalties provided for by the law. In view of this assessment, this paper aims to contribute to the research on women in corporate governance by highlighting some of open issues about female representantion on boards as well as the challenges for the future of the corporate governance in the Italian context. Keywords: Board Gender Diversity, Gender Quotas, Italian Corporate Governance, Multiple Board Directorship, Women Directors 1. INTRODUCTION effects on the strategic decision-making process, on the company control system and on the economic The board of directors is the most important and financial performance of the companies have decision-making body in a corporation. Its correct always fuelled an intense academic and professional composition is considered one of the profiles of debate. effectiveness of corporate governance systems Theoretical perspectives of the literature on (Zahra & Pearce, 1989; Walsh & Seward, 1990; governance assign heterogeneous roles to the board Johnson et al., 1996; O’Neal & Thomas, 1996; of directors (Decastri, 2009, pp. 83-91): strategy Westphal, 1999; Kang et al., 2010, p.889), and its formulation (stewardship theory: Donaldson & Davis, 1991; Muth & Donaldson, 1998); monitoring 185 Corporate Ownership & Control / Volume 16, Issue 1, Autumn 2018, Continued - 1 and control (agency theory: Jensen & Meckling, 1976; 2007; Hoogendoorn et al., 2013) and towards social Fama, 1980; Eisehardt, 1989); connection between responsibility (Hafsi & Turgut 2013). the company and the external environment and the However, some researches have pointed out the resources on which it depends (resource dependence possible negative effects of diversity (Rose, 2007; theory: Pfeffer & Salancik, 1978; Zahra & Pearce, Baranchuk & Dybvig, 2009; Ferreira, 2010). 1989); management support (managerial hegemony According to these scholars, a higher percentage of theory: Lorsh & MacIver, 1989); coordination and women on boards generate longer board meetings to mediation (stakeholder theory: Doaldson & Preston, share different points of view and resolve disputes 1995). and this has a negative impact on operative In the Italian context, typically characterized by performance of the board and on the monitoring small companies and high ownership concentration results (Pastore et al., 2017, p. 67, pp. 80-81). The (Melis et al., 2012; Belcredi & Enriques, 2013; Jaggi et heterogeneity of interests represented within the al., 2016; Moscariello et al., 2018), members of the board may increase the conflict, the difficulty of board of directors represent controlling communication and the possible emergence of shareholders, and the problems of agency between factions within the group which can lessen the board controlling shareholders and minority shareholders cohesion and negatively affect companies’ are more frequent than between managers and performance (Dobbin & Jung, 2011, p. 816). controlling shareholders (Bianco et al., 2015). In recent years, the potential benefits of gender Business economy literature and, specifically, diversity have also drawn the attention of European studies on corporate governance have always market players and Regulators (promoting gender underlined how diversity (in terms of: age, gender, equality is one of the fundamental values espoused geographic origin, socio-cultural and educational by the European Union and a core activity for it) who backgrounds) and the heterogeneity of skills and have started to recommend and/or to require of competences, professional profiles and knowledge, listed companies a heterogeneous gender perspectives and visions, and personalities and composition both in top management and boards gender: and to encourage the participation of women in − increases the independence of collegial decision-making processes, which is considered corporate bodies; essential for the competitiveness and sustainability − ensures the best possible representation and of the EU. protection of all shareholders (Van der Walt & Ingley, In this respect, the EU 2010-2015 Strategy for 2003; Rose, 2007; Hoogendoorn et al., 2013); Equality between Women and Men, the European − makes the decision-making process more Pact for Gender Equality 2011 -2020 and the Strategic effective and improves both executive control and Engagement for Gender Equality for the period 2016-2019 problem-solving processes; have set out a target of 30% of women in senior and middle − creates the conditions for a higher management of both companies listed on stock competitiveness of a company on the markets, a exchanges and government owned companies by lower capital cost, and a greater corporate value. 2015 and a (at least) 40% target by the end of 2019. Since the board of directors has the This European Strategy has been decisive in responsibility for economic governance and business bringing gender policies into the political agenda of results, the ability to perform control effectively several Member States and in encouraging them to over the work of management and equally impose upon listed companies and the state-owned effectively to support strategic decision-making, is ones-either through law (as it happened, for strictly determined by its composition (Hermalin & example, in Norway in 2003, France in 2010, Belgium Weisbach, 2003; Minichilli et al., 2009; Agrawal, and Italy in 2011, and Germany in 2015) or through 2012), with particular reference to personal self-regulatory and corporate governance codes (as characteristics and expertise of the members (Perry in the case of United Kingdom, Luxemburg, Poland, & Peyer, 2005). Sweden, Finland) - the balanced presence of women In the last few years, the increasingly extensive and men in the overall membership of their literature on gender diversity and corporate corporate and management bodies, in order to governance has suggested that companies with a accelerate the process towards economic gender higher proportion of women on their boards are equality, to promote women’s empowerment, to characterized by: achieve a greater heterogeneity in these boards and 1. Best corporate governance practices (and an improved decision-making quality. their transparency) and better organizational In Italy, the State Law No.120/2011 requires performance (Adams & Ferreira, 2009; Nielsen & that public companies (from 12 August 2012 Huse, 2010; Kakabadse et al., 2015); onwards)14 as well as those majority-owned by a 2. A highest number of the board and control government entity (for which the rule was enforced committee meetings (Gallego et al., 2010; Fitzsimmons, 2012) and a generally higher attendance at board meetings than men (regarded as 14 a proxy of the quality of firm governance, which in It is the Act 12 July 2011, No. 120 (Known as “Golfo-Mosca” Law, after turn reduces the absenteeism rate of male members the names of the two authors), on Amendments to the Unified Text on leading to the best possible strategic decisions); finance-related intermediation under Legislative Decree 24 February 1998,