Gender progression - the latest on quotas

Whilst the UK appears to be making some progress on increasing the representation of senior women in business  following Lord Davies recommendations, in the EU supporters of stronger legislation have faced significant resistance.  Two challenges have appeared against the recent proposals, the mixed views of Member States and questions about the legality of any legislation to introduce quotas has been called into question. Notwithstanding the controversial nature of Commissioner Reding's proposals, sufficient support has meant that a draft Directive was announced on 14 November although, despite announcements to the contrary it seems to fall short of binding quotas.

The UK position is clear in that voluntary measures are preferred and yet, other countries are in favour of binding targets and quotas, so much so that in other European jurisdictions binding quotas have already been introduced at domestic level:

  • in Belgium a 30% a binding quota, has to be achieved by 2017;
  • in France 20% by 2014 and 40% by 2017; and
  • in Italy 20% rising to 33% in 2015.

Perhaps more consistent with the UK is the Spanish model which has a target of 40% female representation for larger companies by 2015.

The European Commission plans

Commissioner Viviane Reding has been a strong proponent of European quotas and had planned to push forward with proposed legislation introducing binding gender quotas of 40% on company boards by 2020.  However the final version of the draft Directive proposed by her stops short of requiring binding quotas.  It will be interesting to see how much support might come from the European Parliament and MEPs. Whilst this group has been pushing for legislation in this area, the view is that the EU Council of Ministers may still block the proposal.

The plans were discussed at a meeting on 23 October 2012 and again on 14 November.  We had always anticipated that some Member States (those already comfortable with quotas and in the course of introducing them incrementally) would be in favour of European legislation.

The UK's position is clear in that it will not support wider legislation that goes beyond targets. Recently Maria Miller MP and Minister for Women has declared that the way forward remains through voluntary measures. The UK is not alone, nine other countries have already registered concerns suggesting that national efforts and voluntary measures should be allowed more time.

The draft Directive that was finally announced on 14 November would set an "objective" for companies listed on a European Stock Exchange with more than 250 employees of 40% female representation amongst Non Executive directors  by 2020 - and the same in public undertakings by 2018. With a view to meeting this objective, the draft Directive provides that organisations where there is under-representation must:

  1. have clear and objective appointment criteria to ensure selection is made on merit; and
  2. when faced with candidates of equal merit, select the person from the under-represented gender.

Those familiar with the Equality Act 2010 will recognise that the latter provision is similar to the "tie break" option in UK law. The difference is that under the Equality Act employers have a choice as to whether to adopt gender as a tie-break, whereas the draft Directive seeks to make it compulsory. Member States will be required to introduce fines or other sanctions for failing to take these steps.  It seems there will, however, be no need for penalties for falling short of the "objective" itself, and in this sense the draft Directive stops short of introducing binding quotas.

Legal objections to quotas

One of the major objections to quotas is that, arguably, they would go beyond what is legally permitted by the European Treaty. Whereas the Treaty permits positive action (such as the tie break provision, as long as assessment on merit has taken place)  binding quotas would risk going beyond the agreement and scope of the Treaty by introducing positive discrimination. It is for this reason that the draft Directive falls short of setting quotas with penalties for non-compliance.

As was expressed in the October meeting of the EU commissioners when the subject was discussed, the balance is between the firm commitment to equal treatment of men and women a fundamental principle which is enshrined in the Framework Directive and the Treaty itself, set against the timing (with particularly the economic pressures currently being faced) and the legal issues the provisions raise.

One particularly interesting observation from the debate suggests that there were "doubts as to whether it was appropriate and consistent with the subsidiarity principle for the EU to propose a uniform solution in an area shaped by very different national traditions and political, social and legal systems in the Member States."

Case law from the Court of Justice of the European Union if used as an indication of the level of support and lawfulness, would permit only temporary measures and "on condition that it was always possible to depart from them after individual examination of the qualifications of the candidates concerned".

Progress of Change

Whether this draft Directive comes into force will depend on progress made outside the European Parliament. Given the law making process and the stages involved, ultimately the Directive would need the approval of the Member States of the European Council.  A number of these Member States have stated already that they would oppose any legislation.

From the minutes of the discussion it is clear that Commissioner Reding recognised the issue to be one where opinions differed on the best way forward but regarded the matter as one which was at the heart of the Commission's initiative.  Undoubtedly this is a subject area which will see further significant debate.