Lifting Women Up: Gender Quotas and the Advancement of Women on Corporate Boards

Abstract

Research Question/Issue: The introduction of gender quotas on corporate boards can disrupt the status quo, resulting in externalities that affect women's advancement within the company. This study investigates whether boardroom quotas contribute to promoting women further up the corporate ladder and facilitate access to a broader spectrum of positions. Research Findings/Insights: Using legislative changes in Germany as a natural experiment, we find that quotas increase female representation on affected boards. However, quotas may also have adverse effects on women's executive careers; they fall short of eliminating the glass ceiling and fail to level the playing field for women, both inside and outside the firm. Theoretical/Academic Implications: The incentives provided by the quota to hire female candidates for a mandated board may hinder their prospects for advancement to executive roles. Drawing from institutional theory, we interpret this as evidence of decoupling—firms comply with the law but do not necessarily change their stance on gender diversity at the top. Additionally, when women accessing the board have backgrounds more closely aligned with executive positions (proxied by their affiliation with the capital side of the board), the negative effect on the non-affected executive board is larger. This suggests a substitution effect, whereby women enter nonexecutive positions instead of pursuing executive careers. Practitioner/Policy Implications: Policy design needs to consider the desired outcomes and unintended effects, carefully weighing the trade-offs among them. Relying solely on quotas is insufficient to achieve gender equality in corporations.