As of Jan.1, it became mandatory for all Norwegian companies listed on the Oslo Stock Exchange (Oslo Børs or OBX) to ensure that at least 40 percent of directors were women.

Non-compliance, according to the Norwegian Public Companies Act, can result in a company being de-listed from the OBX. It is also possible for the government to dissolve a company for not fulfilling board requirements.

The gender requirement applies to 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 (PLCs) in the private sector. Limited liability companies are excluded from this regulation. Currently there are about 500 PLCs in Norway.

The gender equality initiative in Norwegian firms began in 2004, when all government-owned companies were required by the Companies Act to maintain boards with 40 percent representation of each gender. For the non-state owned PLCs, the requirements were initially voluntary. However, a July 2005 assessment by the government revealed that only 16 percent of board members were women. In light of the slow progress, Norway’s Parliament in 2006 made the 40 percent requirement mandatory for non-state owned companies after Jan. 1 of this year. PLCs registered before Jan. 1, 2006, were given a two-year transitional period to comply with the law, all firms registered after that date were required to follow the conditions immediately.

The law states that both genders must be represented if the board consists of two or three members. If the board consists of four or five members, at least two must be women. If the board consists of six to eight members, three must be female. At least four women must be on the board if it has nine members, and if the board consists of 10 or more members, then at least 40 percent should be female. If there is more than one employee representative on the board, then both genders must be represented, unless one gender constitutes less than 20 percent of the work force.

As a result, companies have had to recruit about 1,000 female directors, and many firms have claimed it is difficult to find experienced candidates, The Economist reported in January. Some of the most qualified women sit on 25 to 35 boards, leading the Norwegian business community to label them “golden skirts.” As a consequence of the limited supply of experienced female directors, some Norwegian investors have become concerned about “overboarding,” or directors sitting on too many boards. Overboarding, the investors say, can compromise director attendance, adequate preparation for board meetings, and overall performance. In response to the increased demand for female leadership, the Confederation of Norwegian Enterprise has launched a program, called Female Future, and has trained about 600 women in preparation for board and leadership positions.

According to a study by the Norwegian Statistical Bureau (Statistik sentralbyraa), 24.6 percent of Norway’s 2,639 directors were women as of January 2007. The same study revealed that 38.2 percent of the PLCs complied with all the gender representation requirements by the end of 2006, double the number of compliant companies in 2005. However, companies still needed about 460 women at the start of 2007. The search for competent board members and executives stretched across borders to neighboring Nordic countries and to the public sector. For example, Aker Kvaerner, one of Norway’s largest oil companies, has recruited four former ministers to several of its subsidiary boards. By the end of 2007, the Statistik sentralbyraa noted that 84 percent of public firms attained the female board representation requirement.

The oil and gas sector, according to The Economist, possibly had the greatest difficulty in finding qualified female candidates. For instance, DNO, a Norwegian oil firm with operations in the Middle East, found women for its board in November, but they are experienced in human resources and finance rather than oil extraction and supply, company President Helge Eide told The Economist.

Globally, the nomination committees of corporations are dominated by male directors who generally propose men to serve on the boards. Although the 40 percent rule in Norway has put a burden on boards, studies have shown that greater female representation has positive effects. For example, a study by the Conference Board of Canada in 2002 found that corporations with female board directors have superior governance practices, particularly on oversight and control of audit and risk. A joint study of 89 European companies by McKinsey and Amazone Euro Fund concluded that companies with the most gender-diverse management teams outperformed their peers in return on investment by 10 percent, and in pre-tax and pre-interest earnings by 48 percent. The study also noted that stock prices at gender-diverse companies grew 1.7 percent faster than the share prices of less diverse peers.

According to Corporate Women Directors International’s 2007 report on board representation, women hold 11.2 percent of the board seats among Fortune Global 200 companies. In the U.S., women hold about 17.6 percent of board seats, in Sweden 19 percent, and in the United Kingdom 13.9 percent. Female board representation is lower in other developed markets, including the Netherlands (12.2 percent), Germany (10.9 percent), Switzerland (9.5 percent), France (7.6 percent), Italy (2.9 percent), and Japan (1.3 percent).