1 Gender balance on corporate boards
| Committee's assessment
| Legally and politically important |
| Committee's decision | Not cleared from scrutiny; further information requested
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| Document details | Draft Directive on improving gender balance among non-executive directors of companies listed on the stock exchange and related measures
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| Legal base | Article 157(3) TFEU; co-decision; QMV
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| Department | Business, Innovation and Skills
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Summary and Committee's conclusions
1.1 The draft Directive seeks to redress the gender imbalance
on the boards of many publicly listed companies by introducing
new procedural requirements for the recruitment and selection
of non-executive directors. Although drafted in gender-neutral
terms, the objective of the Directive is to increase the presence
of women on company boards so that they comprise at least one
third of a company's directors or 40% of its non-executive directors
by 2020, or sooner (by 2018) in the case of public undertakings.
1.2 Whilst endorsing the objective of greater gender
balance on company boards, the Government has consistently opposed
EU legislation on the grounds that establishing an EU-wide 40%
quantitative objective would be tokenistic, counter-productive
and tantamount to introducing quotas. It has advocated, instead,
national measures which can be better tailored to the business
culture and company law requirements of each Member State. We
share the Government's reservations about the necessity for action
at EU level and recommended issuing a Reasoned Opinion which the
House endorsed in January 2013.
1.3 Progress since then has been slow, not least
because the range and diversity of company systems have hampered
efforts to agree measures that would work in all 28 Member States.
The European Parliament broadly supports the Commission proposal
but a number of Member States share the Government's concerns.
Whilst continuing to oppose the draft Directive, the Government
has supported some changes which clarify the scope of the proposal.
These include what the Minister for Employment Relations and Consumer
Affairs (Jo Swinson) has described as "a welcome change"
in the provisions enabling Member States to derogate from the
procedural rules on the selection and appointment of non-executive
directors if they have already put in place effective measures
to achieve the 40% quantitative objective.
1.4 We asked the Minister to clarify the scope of
the derogation and to indicate whether it was likely to be of
benefit to the UK, in light of the progress made domestically
in implementing the measures advocated by Lord Davies of Abersoch
in his 2011 review, Women on boards. We also asked the
Minister to provide updated figures on the number of women represented
on the boards of publicly listed UK companies and to indicate
whether the trajectory of change anticipated between now and 2020
was likely to achieve the 40% quantitative objective.
1.5 We noted that the Minister had not addressed
a number of questions raised in our earlier Reports. In particular,
we asked how many of the 950-odd listed companies which she expected
to fall within the scope of the draft Directive would be excluded
from its application because they qualify as small and medium-sized
companies (SMEs). We also requested a summary of the outcome
of the Government's consultation of stakeholders, as well as a
summary of the main changes proposed to the Commission proposal
by the European Parliament and the Government's position on them.
1.6 We thank the Minister for her update but express
our considerable frustration that, yet again, her letter does
not address the specific points raised in our earlier Reports.
We remind her that we have asked her to:
· clarify
the changes made to the provision enabling Member States to derogate
from the draft Directive and to indicate whether she considers
that the UK would be able to make use of this derogation;
· explain
whether the trajectory of change which she describes in her letter
is likely to be sufficient to enable the UK to meet the 40% quantitative
objective by 2020 (or by 2018 in the case of public undertakings);
· indicate
how many of the 950-odd listed companies in the UK which are within
the scope of the draft Directive would be exempted from its provisions
on the grounds that they are SMEs; and
· summarise
the outcome of the Government's consultation of stakeholders,
as well as the main changes proposed to the Commission proposal
by the European Parliament and the Government's position on them.
1.7 We also looking forward to receiving further
progress reports on negotiations, particularly if there is a prospect
that the current blocking minority may crumble. Meanwhile, the
draft Directive remains under scrutiny.
Full details of
the documents: Draft Directive on improving
gender balance among non-executive directors of companies listed
on the stock exchange and related measures: (34423), 16433/12
+ ADDs 1-3, COM(12) 614.
Background
1.8 Our earlier Reports (listed at the end of this
chapter) provide a detailed overview of the draft Directive, the
Government's position, and the grounds on which we recommended
that the House issue a Reasoned Opinion.
The Minister's letter of 2 July 2014
1.9 The Minister notes that the UK is one of 11 Member
States opposed to the draft Directive and that, as a result, it
is blocked within the Council. Although she expects the blocking
minority to remain stable for the time being, the Italian Presidency
regards the draft Directive as a priority and intends to explore
drafting changes which may persuade some Member States to change
their position. She continues:
"From the blocking minority, the Czech Republic,
Estonia and Germany are seen as potential candidates to change
their position, as none of them have decided their positions following
internal political elections."
1.10 The Minister reiterates the Government's position
that "mandatory processes at the EU level are not the right
mechanism" to secure more women on the boards of the UK's
top companies. She adds:
"It remains our view that that action taken
in each country should be different, according to that country's
starting point, legal system and unique business environment.
Therefore we continue to oppose this Directive on grounds of
subsidiarity and proportionality."
1.11 Turning to the progress made in the UK in increasing
the representation of women on company boards, the Minister observes:
"In 2011 we set the target of achieving
25% women on the boards of our largest 100 companies by 2015.
Women's representation on FTSE 100 boards now stands at just
over 22%, up from 12.5% in 2011, and there are now no all male
boards. The FTSE 250 have more than doubled the number of women
on their boards since 2011 and it now stands at just over 16%,
up from 7.8% in 2011. There remain 48 all male boards in the
FTSE 250, down from 132 in 2011. This is clear evidence that
the UK's business-led, voluntary approach is working and we are
starting to see a cultural change take place right at the heart
of British business."
1.12 The Minister adds:
"We respect the right of others to put quotas
in place, but we remain committed to self-regulation and are confident
that with sustained and continued action we will meet our target
of 25% by 2015."
Previous Committee Reports
Twenty-eighth Report HC 83-xxv (2013-14), chapter
3 (18 December 2013); Thirty-third Report HC 86-xxxiii (2012-12),
chapter 8 (27 February 2013); Twenty-third Report HC 86-xxiii
(2012-13), chapter 1 (12 December 2012).
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