German daily newspaper Die Tageszeitung reported last week (Frauen sollen Krise lösen by Beate Willms, April 2 2009) the results of the seven-year study of the effects of the voluntary agreement of German companies to support employed women. Seeking to avoid governmental regulation, companies concluded the agreement in 2001. On behalf of the Federal Ministry of Family, Seniors, Women and Youth Affairs (das Bundesministerium für Familie, Senioren, Frauen und Jugend), the researchers of the German Institute for Economic Research (Deutsches Institut für Wirtscharsforschung, DIW) monitored the share of women in leading positions in the private sector between 2001 and 2007. The results are not particularly surprising. The share of women in leading positions did not change significantly: It increased from 26 to 31% between 2001 and 2006 but went down to 27% in 2007. 98% of positions in management board of 200 largest companies were still occupied by men in 2007. The share of women occupying positions in supervisory boards equaled 10% but the researchers explain it by the pressure form work councils and trade unions.
Although these findings are not directly relevant to the questions of cross-border governance, they made me think about several parallels to transnational private regulation. The findings raise the question of the effectiveness of business self-regulation, which has been one of the core issues in scholarly and policy debates on transnational private regulation. How effective are voluntary agreements and programs and how to improve their effectiveness? These are essentially empirical questions and there are no straight-forward answers.
In some cases, for example international technical standards, self-regulation seems to be more successful than in others, such as environmental or labor standards. The explanations can range from the nature of the problem to the incentive structure. In the case of technical standards, firms agree to bear certain constraints and costs because they also expect to benefit from it. In the case of environmental or labor standards, firms also accept constraints and costs but probably do not expect significant tangible benefits. They may be therefore less interested in going beyond rhetoric commitments.
Moreover, the lack of effective monitoring and control mechanisms and specific targets and sanctions may also reduce the impact of self-regulation. The Tageszeitung’s report is a case at hand. Neither commitments nor sanctions were specified. No system of monitoring and control of companies’ performance was introduced. As a result, despite companies’ commitment to support employed women, the share of women in leading positions did not grow significantly. In contrast, voluntary certification systems of firms’ environmental and social performance based on specific standards and independent verification of compliance seem to have a stronger impact on corporate practices. Firms that seek to secure their position in the market and avoid conflicts with nongovernmental organizations stick to the standards because if they don’t they will lose their certificates and the advantages of being certified.
For example, the studies of the effects of forest certification program run by the Forest Stewardship Council suggest that forest certification has a positive impact on biodiversity protection, worker safety and local community relations, among other things. The FSC stakeholders have emphasized that continuous improvement of the FSC’s mechanisms of monitoring and control over certifiers and certificate holders’ performance is necessary for maintaining the FSC’s credibility.
Finally, the context, in which voluntary agreements and programs are implemented, also shapes their impact. Institutional and material infrastructure has to be in place to support voluntary commitments by firms. In the case of employed women, the DIW researchers propose that governments should create opportunities for women to combine career and family, for example, by opening more preschool day-care facilities for children. In case of environmental and labor standards, it is also the case that voluntary standards work better where governments support private rule-makers and where organizational infrastructure is in place.
To sum up, it seems likely that introducing effective monitoring and control measures can help improve the effectiveness of voluntary private agreements and programs. At the same time, firms should have incentives to become subjects to additional monitoring and control, such as reputation gains. Moreover, governments have to invest in the infrastructure that would help women to combine family and carrier. The researchers at DIW correctly call firms to accept more concrete and measurable commitments and encourage policy-makers to invest in the infrastructure that should help women remain active in the labor market.