Gender diversity at board level is an important issue politically, socially and economically. There is a growing recognition of the business case for more diversity. A number of different approaches have been used across the EU to address this issue, with mixed success. They include coercive measures such as quotas imposed by government intervention, liberal approaches that rely on voluntary corporate commitment and collaborative approaches that rely on co-operation between government and business stakeholders.
In the UK there has been significant progress since Lord Davies published his report on Women on Boards in 2011. One of the key recommendations of the report was that UK companies should set aspirational targets for the number of women on boards; FTSE 100 companies should aim for 25% female representation by 2015. The percentage of female directors of FTSE 100 companies has risen considerably from 12.5% in 2011, to 20.4% in January 2014 (source BoardWatch), but it is unclear whether the 25% target can be met by 2015. Progress at the FTSE 250 level has been slower.
New EU Directive on gender balance among non-executive directors
A new European Directive, currently going through the European Parliament, aims to improve the gender balance among non-executive directors of the EU's listed companies. On 20 November 2013, the European Parliament confirmed its support for the draft Directive and it is now awaiting endorsement by the European Council of Ministers.
The Directive will require EU listed company boards to set a "minimum objective" for the "under-represented" sex to hold at least 40% of the non-executive director positions on a corporate board. It will also require companies to publish targets for female representation among executive directors, but without setting a minimum objective for executive directors. It also requires companies to report annually on board gender representation and on the measures taken in the light of the 40% objective.
The new Directive applies to listed companies:
- which have their seat in the EU;
- have more than 250 employees; and
- have an annual worldwide turnover of more than €50m.
Where one third of all directors on the board are women, regardless of whether they are executive or non-executive directors, the company is exempt from the requirement for 40% female non-executive directors.
Companies cannot positively discriminate in favour of women. Appointments must be made on "pre-established, clear, neutrally formulated, non-discriminatory and unambiguous criteria" to meet the 40% objective. However, companies may take positive action to achieve the minimum objective. If candidates are equally qualified in terms of suitability, competence and professional performance, priority will be given to the under-represented sex.
Member States must lay down rules on sanctions to be applied in the event of breach but will be free to adopt whatever sanctions they see fit, provided they are "effective, proportionate and dissuasive" and include partial exclusion from:
- public calls for tenders; and
- funding awards from the EU’s Structural Funds.
The Directive would require companies to aim to meet the minimum 40% objective by 1 January 2020; listed public undertakings have an earlier deadline of 1 January 2018.