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Women on Boards: EU Calls for 40% Quota

7/8/2011

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The European Parliament is calling for EU-wide legislation which would require the boards of listed companies to consist of at least 40% female members by 2020. Currently only about 10% of directors are female in the large listed companies in the EU and this has been fairly static over the last five years. How does this EU average compare to the US or UK? The unfortunate news is that the percentage of female board directors is appalling low across the western world despite women’s high participation in the workforce as well as attainment of both undergraduate as well as advanced degrees.
Gender Diversity on Boards in the US, UK and Globally

In the US approximately 15% of board members for Fortune 500 companies are women and this is unchanged since 2008. In the UK the percentage has hovered around 12% in recent years. Although not recommending statutory quotas immediately, the UK’s Davies Report made three key recommendations: 1. All chairmen of FTSE 350 companies should set out the percentage of women they aim to have on their boards in 2013 and 2105; 2. FTSE 100 boards should aim for a minimum of 25% female representation by 2015 and 3. Companies in the UK should be required to report on what they are doing about gender diversity – including targets, implementation plans and timeframes. Against this backdrop a voluntary initiative has emerged in the UK called the 30% Club – a group of chairmen committed to voluntarily bringing more women onto UK corporate boards.

According to Corporate Women Directors International 2010 Report, the total percentage of women board members globally continues to increase at a glacial pace. The percentage of board seats held by women from 2006-2009 increased by only 1% to 12.2% from 11.2% in 2007. This means that men still hold 87.8% of all board appointments to the 200 largest companies in the world.

Likely Outcome to EU’s Proposed Quotas for Women on Boards

For the past year Viviane Reding, EU Justice Commissioner, has tried to work with the large EU companies to come up with a voluntary scheme, comparable to the UK’s 30% Club, to effect change in the boardroom without having to resort to legislation. Her proposal was to have 30% women directors by 2015, rising to 40% by 2020. This initiative has now stalled with only a handful of EU companies buying into the proposed targets. Dr Ruth Sealy, Senior Research Fellow and Deputy Director at Cranfield’s International Centre for Women Leaders commented on the EU’s recent announcement, “ Reding has focused on this for a while and it’s unfortunate that legislation needs to be considered, but the fact remains that too many European countries have been talking, but not acting. Post the Davies Report there is now a sense of engagement in the UK. The target of 30% female board directors on the UK’S FTSE 100 boards by 2020 looks perfectly achievable.”

The sentiment in Brussels seems to be that European legislation mandating quotas for the supervisory boards of listed European companies could be on the agenda within a year if no voluntary plans emerge. The national European governments are unlikely to embrace this new legislation which will need a majority or potentially unanimous backing (depending on the format of the legislation) in order to become a reality. The likely outcome is support for monitoring and transparency rather than hard numbers dictated by the EU.

The Female Capitalist’s Viewpoint

Where does The Female Capitalist™ stand on this issue? My view is that even the mere threat of quotas is forcing companies to become more aware of their board composition, with some companies taking action before any legislative changes are made. If proposed voluntary measures do not result in real change in the boardroom, I’m afraid that my strong business orientation compels me to support quotas – that is to say, the business case is clear. A report from the UK’s Equality and Human Rights Commission suggested that at the current rate of change it will take 70 years to achieve gender balance in the boardroom. As a mother of a 24 year old daughter, I am not willing to wait that long.

What’s your view?
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