Setting an example. The effect of board quotas on female labor market outcomes in Finnish state-owned companies

Abstract

In early 2005, the Finnish parliament reformed the law on equality between women and men. The reform added a section which introduced a quota, forcing Finnish state-owned companies to have equal representation of women and men on their boards. Finnish state-owned companies had varying levels of female board members before the reform and were therefore unequally affected by the quota. Companies that already had equal representation had to take no measures, while companies with zero female board members had to take comparatively large measures to comply with the new ruling. I utilize this difference as an instrument in researching how female representation on company boards affects both the overall female employee share, and women’s earnings.

Finnish state-owned companies are divided into three categories by ownership: companies owned by the central government, companies owned by the munici-palities, and companies owned by the Åland government. The companies are heterogenous in most matters, varying in purpose, size and other aspects; however, they are all similarly affected by the quota. In addition to my main regressions, where I include all state-owned companies, I run regressions where I limit the sample to include only government-owned companies to research whether there is a difference in outcome that might depend on ownership. Regardless of controls or instruments, I find no such difference.

Ultimately, my research design fails, as Finnish state-owned companies fail to comply with the law in every year on average. Without near full compliance, my instrumental variables regressions provide unsatisfying results which cannot be interpreted as causal. However, I do provide evidence of a positive correlation between the share of women on company boards and female representation in the top earning echelons. Furthermore, I discuss different explanations to why Finnish state-owned companies fail to comply with the law and argue that the most persuasive reason is the absence of sanctions for non-compliance.