Although in women are generally well represented in Norwegian public life and society – half the country’s ministers and a thirds of its MPs are women, and more women get higher education – private sector boardrooms have traditionally been something of a male bastion. In 2005, a full 50 per cent of publicly held companies had no women on their boards.
“More than half of the people who have a business education today are women. It is wrong for companies not to use them,” says the minister for equality Karita Bekkemellem. In January 2006, not content to wait for companies to take to their senses and employ more women, the Government put into effect a law requiring that by 2008 each sex must make up a minimum of 40 per cent of the board room of any publicly held company.
The following article outlines the purpose of and the principles behind the Norwegian balanced representation policy.
Why gender representation rules?
Reaching a balanced participation is a question of democracy. The Government regards the legislation on women in boards as an important step towards equality between the sexes, a fairer society and a more even distribution of power, and as an important factor in the creation of wealth in society. The legislation will secure women's influence in decision making processes of great importance for the economy in the society. It is important to make use of all the human resources in our country, not just half of it.
What companies will be affected?
The legislation on gender representation in boards will imply for all publicly owned enterprises (state-owned limited liability and public limited companies, state-owned enterprises, companies incorporated by special legislation and inter-municipal companies) and all public limited companies in the private sector. There are approximately 500 public limited companies in Norway.
No rules have been proposed for privately owned limited liability companies because most of these companies in Norway are small family enterprises and the owners are themselves members of the board. Public limited companies normally have a broader spread of shares and less personal involvement in the management. Norway has approximately 160 000 limited liability companies.
Entry into force
According to an agreement between the previous Government and the private business sector, the rules applying to private companies should not come into effect if the desired gender representation was achieved voluntarily by 1 July 2005.
A survey carried out by Statistics Norway, shows that by 1 July 2005 Norway had 519 public limited companies in the private sector. 68 (13,1 per cent) of these companies fulfils all the demands laid down by the law. 16 per cent of the board members are women. If the deputy board members are taken in to account, 16,9 per cent of the board members are women.
The rules applying to state-owned companies entered into force on 1 January 2004, and the rules regarding privately owned public limited companies entered into force 1. January 2006.
There is a normal transitional period of two years from entry into force for companies registered prior to that date. This means that the public limited companies must comply with the rules before 1. January 2008. New companies, i.e. companies that was not registered by the time the law entered into force, will have to fulfil the demands to be registered.
What does the law say?
The requirement of the gender representation law is that both sexes shall be represented on company boards as follows:
- If the board has two or three members, both sexes must be represented.
- If the board has four or five members, each sex shall be represented by at least two representatives.
- If the board has six to eight members, each sex shall be represented by at least three representatives.
- If the board has nine members, each sex shall be represented by at least four representatives.
- If the board has more than nine members, each sex must make up at least 40 per cent of the representatives.
These rules also apply to the election of alternates.
There are special requirements for employee representatives: Where two or more board members are elected from among the employees, both sexes must be represented. This also applies to alternates. This rule will not be applicable in companies where one of the genders represents less than twenty per cent of the total number of employees on the date of the election. The gender quota is to be applied separately to employee-elected and shareholder-elected representatives in order to ensure independent election processes.
No new laws regarding enforcement have been passed. Company legislation already provides for the enforcement of the rules regarding the composition of the board. The rules regarding gender representation will have a natural place in these provisions. This requirement will be enforced through the normal control routines followed by the Register of Business Enterprises. Under these rules, the Register of Business Enterprises will refuse to register a company board, if its composition does not meet the statutory requirements, just as it refuses registration if the chief executive officer or auditor does not fulfil the legal conditions. A company which does not have a board that fulfils the statutory requirements may be dissolved by order of the court.
Experience shows that most companies where discrepancies are pointed out, correct these in due time. Therefore, it is unlikely that any companies will be dissolved by the court on account of the gender representation rule.
According to the Public Limited Companies Act, the King (the Ministry) can decide that a forced dissolution shall not be executed because of "substantial public interests". In such cases, the company will have to pay a compulsory fine until the conditions are in accordance with the law. This regulation applies to different situations such as requirements regarding the board of directors, the general manager, the auditor and the annual accounts.
The current Minister of Children and Equality is Ms Karita Bekkemellem of the Labour party.
For more information on the Norwegian requirements for gender representation on company governing boards, click here.
A set of Norwegian public institutions devoted to promote gender equality have set up the website “Gender in Norway”, where you can find more information on the gender equality situation in Norway: http://www.gender.no