By Shreyaa Chezhian
The catfight in Europe over laws to require quotas for women on boards steps up a gear this week. Vivian Reding, the EU Commissioner for justice, fundamental rights and citizenship, is still pushing a one-size-fits-all quota of 40% for boards across Europe in the latest version of her proposed legislation, a parliamentary roundtable has heard. But it is likely to be legally enshrined and enforced only at national level.
Last week’s roundtable was organised by parliament’s ALDE (Liberal) group to tackle the highly controversial issue of using such quotas to boost the numbers of women in top positions on company boards by 2020.
Reding made it clear that certain features of her plans, rejected by her fellow commissioners, including female colleagues, last month, will remain, including the 40% quota within a ‘reasonable’ timeframe – and application to listed companies only.
“Qualifications must also be decisive criteria for candidates and the quotas will be a temporary law until the ‘problem’ has been solved and they aren’t needed anymore”, she explained.
The commissioner added that member states will play a vital role in implementing quotas, particularly because two thirds of EU governments had taken “no action at all”.
This latest EU gender quota law is due to be presented tomorrow (weds) when Reding hopes it will secure the support it needs, first within the 27-strong Commission and then elsewhere.
The new corporate governance rules require listed companies to report annually on their diversity policies with specific reference to the employment of women. One interpretation of all this activity is that many are clearly busy seeking to increase the regulatory burden the UK government says it wants to lighten by following the lead of Commissioner Reding.
The basic issue is clear. A large proportion of female talent in the workplace opts out early, leaving far too few available to become senior management and board members. The reasons for this are traditionally said to be ‘complex’.
Many studies demonstrate that gender-balanced boards perform better on average than male-dominated ones. And, in an increasingly competitive executive jobs market, the UK must make sure it captures the best talent in corporate leadership. However, at the last count, the proportion of women on boards of FTSE 100 companies stood at only 15.6 per cent. There’s no dispute that Britain has a problem.
To date, however, the UK has opted against rigid enforcement of more diversity. In February 2011, the government released a report written by Lord Davies (former chairman of Standard Chartered), which made several sensible recommendations. These included greater transparency of board-level gender diversity policies and a voluntary 25% quota for female directors by 2015. And this softly-softly approach has so far proven successful. In the last year, the proportion of women on FTSE 100 boards increased by a quarter.
The 2011 report attributed the reasons to lack of flexible working, work-life balance and disillusionment at lack of progress. In keeping with most politically correct reports nothing was said about those who preferred raising their children or made an intelligent assessment that the rat race was not for them. This is not to argue that the other factors are negligible, plainly they are not, but simply a plea for some realistic balance.
Conservative MEP Marina Yannakoudakis, who has campaigned vigorously against the quota scheme, hailed the potential rejection of the proposal by the college of Commissioners as “good for business and ultimately good for women too.” She said an arbitrary system of quotas, backed by the threat of swingeing fines against companies which failed to comply, would have been cosmetic and false.
“This interfering piece of window-dressing would have hampered business and done women a disservice, because it would fail to tackle the root causes of the under-representation of women in top jobs.”
Eight member states, including the UK, with the tacit support of Germany, are reported to have written to JosĂ© Manuel Barroso, EC President, objecting to these plans. Ms Yannakoudakis observed: “It is clear that many member states are simply fed up with interference in employment law coming out of Brussels.
“Of course there are too few women around our boardroom tables. But the best way to tackle that is to support women at all levels of business, so that they may achieve their full potential on merit.
“In the UK the voluntary system is working and, while some member states have introduced their own system of quotas, it should be down to individual organisations and individual countries to make their own arrangements. Nobody should have a set of rigid rules enforced from outside.”
But a number of countries have already imposed quotas, some backed by sanctions and some not. In Norway a law set a quota of 40% and achieved this by threatening to dissolve non-compliant companies. Norway was highlighted at the roundtable discussions.
A problem with quotas, however, is the question who will next demand ‘representation’. If a numbers game is appropriate for women why not for other under-represented groups? How many directors of FTSE 100 companies are black, gay or religiously devoted? If a quota is appropriate for one protected group why is it wrong to have one for all of them?
It may look good for politicians to force up the numbers on boards but it will not help women in the long run if it is seen to undermine the principle of promotion on merit. If regulation is really necessary it should deal with the much more difficult issues that dissuade women from staying at work and their promotion will then be achieved by their talent and ability.