Gender Quotas on Corporate Boards
Last year Panama joined the list of countries that have established quotas as a mean for reducing the gender gap. Law 56 of 2017 creates a women quota of 30% on corporate boards of public entities and certain private entities. The Law was recently regulated through Executive Decree 241-A of 2018.
This Law applies to Central Government entities, Decentralized Government entities, state enterprises and mixed capital companies, as well as to companies regulated by the Superintendency of Banks, the Superintendency of Insurance and Reinsurance, the Superintendency of Capital Markets (SMV for its initials in Spanish) and the Panamanian Autonomous Cooperative Institute.
According to the regulatory decree, the purpose of the quota is to give priority to the candidate of the less represented gender if they have the same qualification as the candidate of the other gender in terms of experience, merit, competence and professional performance.
Mixed capital companies
Regarding mixed capital companies, although the Executive Body is in charge of appointing women to meet the quota -taking into consideration aspects such as their preparation and professional experience- the representatives of private equity shall also seek the participation of women on corporate boards.
In compliance with Law 56, regulated entities shall provide in their corporate governance manuals, good practices related to the designation of board members based on criteria of gender equity, merit, experience and in accordance with the requirements of each industry.
To verify compliance with the law, the regulated entity must submit an annual questionnaire to its respective regulator and publish this information on its website as well. It is important to highlight that the law does not provide sanctions for not complying with the quota, but the regulatory decree provides that in case of non-compliance, the company shall give the explanations thereof.
It should also be noted that Law 56 does not affect the current composition of corporate boards, instead it applies gradually to new designations of members being required to meet a 10% quota in July 2018, a 20% quota in July 2019, until reaching a 30% quota in July 2020.
According to information from the SMV, in 2014 out of 744 positions of companies’ boards listed on the Panama Stock Exchange, only 75 were occupied by women, and the percentage of women in boards of Panamanian capital companies in the banking sector is only 4%. It was not until 2014, after 110 years of existence, that the National Bank of Panama elected a woman for the first time as a member of its board of directors.
According to the Global Gender Gap Report 2017 of the World Economic Forum, with 0 representing disparity and 1 representing parity, Iceland leads the list with 0.878, Nicaragua is in the sixth place with 0.814 and Panama is at number 43 with 0.722, above the United States in the 49th place with 0.718. These statistics show that Panama is no stranger to this challenge. Gender equality is precisely one of the sustainable development goals of the United Nations, a commitment undertaken by Panama.
According to Klaus Schwab, Founder of the World Economic Forum, "Gender inequality deprives the world of a huge resource of untapped talent at a time when it is so important to address the enormous challenges and the disruptive forces we face”.
Faced with this situation, various measures such as gender quotas have emerged. Panama has joined the list of countries that have established quotas, such as Iceland, Norway and Finland (leaders in gender parity). In Latin America, countries such as Argentina, Bolivia, Brazil, Colombia, Costa Rica, Ecuador, El Salvador, Haiti, Mexico, Nicaragua, Paraguay, Peru, the Dominican Republic and Uruguay have also created laws with some type of quota.
The tangible positive results that diversity brings -not only of gender- are indisputable, including increasing performance, profitability and competitive advantages. The World Economic Forum estimates that the world GDP could increase by $5.3 trillion dollars by 2025 if it closed the gender gap in economic participation by 25% over the same period. This shows that it is not only necessary, but also convenient, to increase the participation of women and achieve gender parity.