4 Gender balance on corporate boards
| Committee's assessment
| Legally and politically important |
| Committee's decision | Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Innovation and Skills Committee
|
| Document details | Draft Directive on improving the gender balance among non-executive directors of companies listed on stock exchanges and related measures
|
| Legal base | Article 157(3) TFEU; co-decision; QMV
|
| Department
Document numbers
| Business, Innovation and Skills
(34423), 16433/12 + ADDs 1-3, COM(12) 614.
|
Summary and Committee's conclusions
4.1 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 executive or 40% of its non-executive directors
by 2020, or sooner (by 2018) in the case of public undertakings.
4.2 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
have also questioned the necessity for action at EU level and
recommended issuing a Reasoned Opinion which the House endorsed
in January 2013.
4.3 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 — sufficient to constitute
a blocking minority within the Council — share the Government's
concerns. Whilst continuing to oppose the draft Directive, the
Government has been willing to explore possible compromise proposals
to protect against the eventuality that the blocking minority
may not be sustainable.
4.4 The Minister for Employment Relations and Consumer
Affairs (Jo Swinson) has provided regular progress reports on
negotiations within the Council. In her latest letter, she provides
a brief update on developments in advance of the Dissolution of
Parliament.
4.5 As we noted in our earlier Report, further
progress on the draft Directive within the Council, as well as
the UK's ability to sustain a blocking minority, remain uncertain
but there appears to be a renewed impetus for agreement. We reiterate
our request for early warning and, if possible, sight, of any
compromise proposal on which the Presidency may seek to secure
a general approach, accompanied by a detailed assessment of its
content and policy implications for the UK.
4.6 Whilst we welcome progress made by FTSE 100
companies in achieving greater gender balance on their boards,
we note that the draft Directive would set a more ambitious target
and apply to a much larger number of listed companies. A clear
understanding of the scope of the derogations contained in any
text agreed by the Council will therefore be essential to assess
the impact of the draft Directive for the UK. We ask the Minister
to ensure that her assessment of any compromise text put forward
by the Presidency fully addresses its implications for non-FTSE
100 listed companies. Given the possibility of a general approach
in June, we draw our chapter to the attention of the Business,
Innovation and Skills Select Committee. Meanwhile, the proposal
remains under scrutiny and we ask the Government to provide regular
progress reports.
Full details of
the documents: Draft Directive on improving
the 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
4.7 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. Whilst rejecting the
case made by the Commission for EU legislative action on subsidiarity
grounds, we have also sought to explore:
· the
trajectory of change within the UK, and across the EU, in securing
more balanced gender representation on company boards;[5]
· the
number of publicly listed companies in the UK likely to be affected
by the draft Directive — although the Government has indicated
that there are approximately 950 such companies in the UK, those
qualifying as small or medium-sized enterprises ("SMEs")
would be excluded from its application;
· the
scope of possible derogations from the draft Directive and their
application to publicly listed UK companies; and
· stakeholder
views on the draft Directive.
The Minister's letter of 16 March 2015
4.8 The Minister (Jo Swinson) says that the Government's
position on the draft Directive has not changed:
"We, along with some other Member States,
believe that EU level action is not required. We have made good
progress in the UK and believe we should be able to continue our
own domestic policy, in a way that suits the UK."
4.9 She notes that the European Parliament debated
the proposal on 13 January 2015 and expressed disappointment at
the lack of progress made within the Council. The Latvian Presidency
has pledged to advance discussions and scheduled a Council working
group meeting for 23 March 2015, followed by further consideration
at the Employment, Social Policy, Health and Consumer Affairs
(EPSCO) Council in June. The Minister explains that "this
could just be an update" or the Presidency may seek agreement
to a "general approach", depending on the progress made
within the Council working group.
4.10 Turning to the progress made in the UK in achieving
greater gender balance on company boards, the Minister observes:
"Domestically, we have seen an improvement
in FTSE 100 figures in the last few months, with the figure now
at 23.5%. This is positive and shows improvement from what we
were seeing late last year/early this year. We are not certain
of what caused this slowing in the figures, but this could be
a seasonal phenomenon and we can look into this. We are confident
that business will be able to achieve the 25% target that Lord
Davies set before the end of the year."
Previous Committee Reports
Thirty-first Report HC 219-xxx (2014-15), chapter
2 (28 January 2015); Ninth Report HC 219-ix (2014-15), chapter
6 (3 September 2014); Sixth Report HC 219-vi (2014-15), chapter
1 (9 July 2014); Twenty-eighth Report HC 83-xxv (2013-14), chapter
3 (18 December 2013); Thirty-third Report HC 86-xxxiii (2012-13),
chapter 8 (27 February 2013); Twenty-third Report HC 86-xxiii
(2012-13), chapter 1 (12 December 2012).
5 BoardWatch tracks the appointment of women to FTSE
100 and FTSE 250 company boards. Back
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