After much debate, in November last year the European Commission announced its proposals to increase the number of women sitting on the boards of companies. Significantly, it decided not to introduce mandatory quotas of 40% female board members by 2020. The UK, backed by ten other member states, was successful in securing flexibility for individual member states to choose whether to enforce the quotas through sanctions. As such, the 40% figure is now an objective, rather than an obligation. At the time, the UK Government, which believes it has made progress through Lord Davies' Women on Boards report, branded quotas as "patronising women and undermin[ing] the business case", and demonstrated its preference for aspiration rather than regulation as the driving force for change. This decision was backed by leading businesswomen such as Burberry CEO Angela Ahrendts (now one of only two remaining female CEOs of FTSE 100 companies).
The revised proposals, which are yet to become law, apply only to non-executive directors of European public companies with more than 250 employees. While the quotas themselves may not be mandatory, companies will be required to put in place measures aimed at encouraging a better gender balance on their boards, or face sanctions.
Controversially, it has been suggested that these measures may in the future include positive discrimination - hiring female candidates over equally qualified male candidates. In addition, there will be an expectation that the mechanisms put in place by companies will be transparent, and reported on annually. Unsuccessful female candidates will have the ability to require disclosure of the selection criteria applied so that they can uncover discriminatory practices on which to base any legal claim. The EU considers that the threat of litigation arising from requests for disclosure should encourage companies to adopt more diverse hiring practices. However, experience of the existing pre-action discrimination questionnaire process in the UK is that such procedures for transparency and access to information do not appear to deter companies from discriminating.
Statutory questionnaires also appear not to resolve discrimination disputes at an early stage, which was one of the intentions behind their introduction in the UK. By the time such information is requested, litigants have often already resolved to litigate, and such information-gathering frequently amounts to no more than an exercise in the extraction of advance disclosure. And while the existing statutory discrimination questionnaire procedure is certainly a valuable tool for claimants faced with a huge information deficit (a problem that is all the more acute for candidates), the Government will soon preside over its abolition to address concerns that it is too onerous for businesses.
In contrast to the position negotiated by the UK for European public companies last year, the Prudential Regulation Authority and the Financial Conduct Authority (formerly the FSA) have recently announced that the EU's Capital Requirements Directive IV will include a requirement on big banks, building societies and investment firms to set a target for the number of women on their board of directors from next year. They will also be required to explain how they will meet their goal. It remains to be seen whether such measures will be particularly onerous on large banks which already have stated targets, but it may herald a change in the UK's approach to quotas which could eventually see similar measures rolled out to other sectors.
In the meantime, the Government has reiterated its commitment to improving boardroom gender equality by "remov [ing] the barriers to achieving goals" for women in the workplace. It is implementing plans to extend the right to request flexible working to all employees with more than 26 weeks' continuous employment (regardless of whether they have any caring responsibilities) and will simplify the procedure for making such requests. This new flexible working regime is expected to come into force in 2014. It will also reform the current parental leave system so that by 2015 both parents will enjoy flexibility over how they look after their newborn children – offering choice as to whether they take the total 12 months' leave currently available to women together or divide it between them.