Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“But where says some is the king of America? I'll tell you friend, he reigns above, and doth not make havoc of mankind like the royal brute of Britain. ... so far as we approve of monarchy, that in America the law is king.”     Thomas Paine,    Common Sense, January, 1776

January 22, 2008

The Consequences When Government Tries To Do A Good Thing™

by Brad Warbiany

I think we can all agree that gender equality is a Good Thing™. I think we can all agree that there should not be any barriers, legal or otherwise, to women reaching the highest levels of the workforce. And I think we can mostly, if not all, agree that the “old boy’s club”, to the extent that it exists, harms our economy by making it much harder for qualified women to reach that level of a company.

The real question, then, is what to do about it. Personally, I’m more of a “let the market sort it out” type. After all, we’ve seen a sea change on this issue in just my lifetime, and anyone who still harbors thoughts that business is just a “man’s game” should keep his guard up before Oprah owns his ass. Norway, though, has taken a different tack. Not content to let the market sort it out, they’ve mandated that 40% of the countries seats on Boards of Directors be held by women. Unfortunately, though, they’ve put the cart before the horse, and simply crowned a few of the countries top business women:

Before the law was proposed, about 7% of board members in Norway were female, according to the Centre for Corporate Diversity. The number has since jumped to 36%. That is far higher than the average of 9% for big companies across Europe—11% for Britain’s FTSE 100—or America’s 15% for the Fortune 500. Norway’s stock exchange and its main business lobby oppose the law, as do many businessmen. “I am against quotas for women or men as a matter of principle,” says Sverre Munck, head of international operations at Schibsted, a media firm. “Board members of public companies should be chosen solely on the basis of merit and experience,” he says. Several firms have even given up their public status in order to escape the new law.

Companies have had to recruit about 1,000 women in four years. Many complain that it has been difficult to find experienced candidates. Because of this, some of the best women have collected as many as 25-35 directorships each, and are known in Norwegian business circles as the “golden skirts”. One reason for the scarcity is that there are fairly few women in management in Norwegian companies—they occupy around 15% of senior positions. It has been particularly hard for firms in the oil, technology and financial industries to find women with enough experience. DNO, for instance, an oil and gas firm that operates in Yemen, Iraq and elsewhere, found women it was happy with last November, but their expertise is in finance and human resources, not oil, says Helge Eide, DNO’s president. “However, we retain sufficient oil and gas experience in the men on our board,” he adds.

When government tries to do something “good”, they end up bringing in unintended consequences and ill effects that they often seem surprised to find. In this case, much like Sarbanes-Oxley, it has caused many companies to go private. And rather than leveling the playing field for all women, it has simply elevated a few specific women to a level where they sit on so many boards that their efforts must be spread too thin to have any real effect.

What is also interesting here is the difference between allowing the market to sort it out, and not. America tends to have relatively low business regulation in comparison to Europe, where the barrier to entry for a public company is tremendous. Thus, America’s more free market offers more opportunity for women to start public companies and to prove their mettle in the business world. As the story points out, this has resulted in about 15% of Board of Directors at American Fortune 500 companies to be women, with Britian, Europe, and Norway (pre-mandate) lagging behind.

This is a perfect example of government attempting to fix a problem through mandate, when all they have done is masked the problem. America lets the market sort this out, and women hold more top-level positions than other industrialized nations. It proves what we free-market advocates have long stated: the free-market isn’t simply the most efficient distributor of capital, it is also one of the most equal and fair systems for distributing opportunity.

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7 Comments

  1. They don’t tell you the women hired are the daughters of people the CEO plays golf with.

    In the past, people could point out that such people were unqualified but now the government mandates that unqualified people must be hired.

    People should also pay attention to how they game the system claiming to help run 3, 5, 8 companies or more and drawing pay and benefits from all of them at the same time. Can anybody seriously claim to be contributing at the $120K/yr level when they’re spending less than 1 hour a day on each company? Of course not, it’s a scam.

    Comment by Ugly American — January 22, 2008 @ 10:14 am
  2. now that the mandate is in place, maybe there will be some incentive to train women for these positions? Certainly it sounds like a rough transition period but I think it’s important to see what happens over the course of a year or two and then reevaluate.

    Right now it sounds to me like a bunch of boys club members kicking and screaming because they aren’t getting their way.

    Comment by Shawn — January 22, 2008 @ 12:56 pm
  3. What incentive is there? More government intrusion? Right now it sounds like bad government policy is creating a worse situation. A free market without government intrusion (which Norway does not have) will best allow this to happen.

    Comment by Adam Selene — January 22, 2008 @ 1:24 pm
  4. Sometimes you get sorted right out of a job.

    Comment by VRB — January 22, 2008 @ 8:25 pm
  5. Socialism and government intrusion will make people worse off, not better.

    Comment by Adam Selene — January 22, 2008 @ 8:37 pm
  6. I’m surprised that this did not happen here with all of the false statistics that are put out every year.

    Comment by Justin Bowen — January 23, 2008 @ 4:41 am
  7. [...] Norway Tries to Smash the Glass Ceiling Filed under: economy, politics — Tags: feminism, Glass Ceiling, Norway — codesmithy @ 11:54 am The BBC has an article about a policy Norway adopted to mandate 40% of their executive boards be female for publicly traded companies. The deadline came on the first of the year, although the original legislation was put into effect 5 years ago. This caused the hiring of almost 1,000 women in intervening 4 years. The Liberty Papers tries to explain why this is a bad thing. [...]

    Pingback by Norway Tries to Smash the Glass Ceiling « Esoteric Dissertations from a One-Track Mind — January 24, 2008 @ 3:54 am

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