Europe's listed companies could be forced to ensure that at least 40% of non-executive board positions are held by women by 2020 or face fines or other sanctions under a legislative proposal being drafted by the European Commission, according to recent press reports. The press speculate that companies larger than 250 employees or with more than €50m in revenues would be required to report annually on the gender make-up of their boards. Those that miss the mandatory quota would be subject to administrative fines or be barred from state aid and contracts. The proposal is expected to be introduced formally by Viviane Reding, Vice-President of the European Commission, this October or November before being put to an EU vote. We shall update you on further developments at that time.
Women currently represent just 13.7% of board seats in the EU's largest publicly listed companies at March 2012, compared to 11.8% in 2010. Roughly 97% of EU CEOs are men.
As discussed in our recent briefing, a number of different approaches have been used across the EU to address this issue, with varying results. They include coercive measures via government intervention, liberal approaches that rely on voluntary corporate commitment and collaborative approaches that rely on co-operation between government and business stakeholders. The European Commission published a report "Women in economic decision-making in the EU" (March 2012) on the limited progress towards increasing the number of women in top paying jobs.
"Why is the rate of progress towards more gender-diversity on corporate boards so painfully slow and stubborn?... I am aware that many companies and policy-makers are opposed to mandatory quotas. Well, I do not like them either. But I like the results they bring." Viviane Reding, 12 July 2012
Both the EU and national governments have a role to play in encouraging change, but the UK government and many UK business leaders oppose mandatory quotas. Significant progress has been made in the UK on this issue through government encouragement and self-regulatory business-led change.
The under-representation of women on corporate boards is already firmly on the political and social agenda following the EU consultation on gender imbalance on boards (closed 28 May 2012) and the House of Lords Call for Evidence (closed 10 July 2012).
Self-regulation can produce dramatic results as we have seen in the UK. The Davies Women on Boards Report (2011) recommended aspirational targets of 25% female representation on FTSE 100 corporate boards, rather than hard quotas. In the UK, there are currently 17.3% female FTSE 100 directors, up from 12.5% in February 2011. Momentum has picked up recently with women winning 44% of FTSE 100 board appointments between March – July 2012.
Transparency can be a potent driver of change; voluntary targets combined with initiatives to improve reporting requirements can produce real results. The UK Corporate Governance Code states that: "The search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender."
Draft narrative reporting regulations due to come into force in April 2013 propose that narrative reports should state the proportion of women on boards and consider gender factors in assessing board effectiveness.
On 4 September 2012, BIS announced a new select committee inquiry into Women in the Workplace to consider the following topics:
Do the Gender Equality Duty and the Equality Act go far enough in tackling inequalities, such as gender pay gap and job segregation, between men and women in the workplace?
What steps should be taken to provide greater transparency on pay and other issues, such as workforce composition?
What has been the impact of the current economic crisis on female employment and wage levels?
How should the gender stereotyping prevalent in particular occupations, for example in engineering, banking, construction, and the beauty industry, be tackled?
What more should be done to promote part-time work at all levels of the workplace and to ensure that both women and men have opportunities to gain senior positions within an organisation while working part time?
To what extent have the recommendations in Lord Davies’ Report “Women on Board” (published in February 2011) been acted upon?
To what extent should investors take into account the percentage of women on boards, when considering company reporting and appointments to the board?
Why are there still so few women in senior positions on boards, and what are the benefits of having a greater number?
How successful is the voluntary code of conduct (a recommendation of the Davies Report) which addresses gender diversity and best practice, covering relevant search criteria and processes relating to FTSE board level appointments?