House of Lords - Women on Boards - European Union Committee

Women on Boards - European Union Committee Contents

Women on Boards

CHAPTER 1: Introduction

1. Gender equality is one of the core objectives of the European Union. The Treaty on the Functioning of the European Union states that "in all its activities, the Union shall seek to eliminate inequalities, and to promote equality, between men and women".[1] A European legislative framework is in place to support this agenda. This includes the 2004 Directive on equal treatment of women and men in the access to and supply of goods and services (also known as the "Gender Directive"),[2] and the 2006 Directive on equal opportunities for men and women in the workplace.[3]

2. Equality in the labour market and in access to board-level positions forms a key part of this work. The issue of gender equality in the boardroom has been discussed at the European Union level for some time, but it is only in recent years that the prospect of specific European measures or legislation to raise the proportion of women appointed to board-level positions has come to the fore.

3. The Vice-President of the Commission and Commissioner for Justice, Fundamental Rights and Citizenship, Viviane Reding, has made this issue a priority during her term of office. In March 2010, the Commission published a "Women's Charter", which included a pledge to "pursue the fairer representation of women in positions of power in public life and the economy"[4] This was followed in September 2010 by the "Strategy for Equality between Women and Men, 2010-2015" which advocated "targeted initiatives to improve the gender balance in decision making".[5] Then, in March 2011, the Commission invited European companies to sign the "Women on the Board Pledge for Europe".[6] By signing this pledge, companies would commit to raising female representation on their boards to 30 per cent by 2015 and 40 per cent by 2020.

4. Despite these efforts, progress remains slower than we would wish. By March 2012, only 24 companies had signed the pledge, whilst the average proportion of women on boards across the EU was less than 14 per cent.[7] This represented an improvement from 2010, when the overall average was around 12 per cent; but at that rate of progression, the Commission noted that it would take 40 years for women to make up 40 per cent of board positions.[8] It therefore launched a public consultation to identify measures to address the "persistent lack of gender diversity in boardrooms of listed companies across Europe",[9] including possible legislative measures.

5. A legislative proposal was expected to follow on from this process on 23 October 2012. However, a day of dramatic developments saw the announcement postponed until at least 14 November amid media reports of a failure to agree upon a course of action within the Commission.[10] The intervening period has been characterised as one of uncertainty ahead of the presentation of a new proposal.[11] Attention has focused in particular on whether legislation should be introduced seeking to institute an EU-wide quota requiring a specified proportion of board positions to be taken up by women. Such a step would represent a significant shift; until now, Member States have taken the primary responsibility for improving gender diversity and have done so in different ways. These varied approaches are outlined in Box 1.

BOX 1

European policy approaches to gender diversity

Legislative measures

Following the example of Norway, which is outside the EU[12] and which introduced a legally binding quota of 40 per cent in 2003, a number of EU Member States have introduced legislative targets or quotas for gender representation on company boards. France, Italy and Belgium have done so for company boards, including sanctions for those companies which do not comply with the quotas. In addition to this Denmark, Greece, Austria, Slovenia and Finland have introduced gender requirements in legislation for the composition of the boards of state-owned companies. Many of these countries have accompanied quotas with efforts to effect cultural change in business.

Voluntary or self-regulatory initiatives

A number of other countries have adopted a self-regulatory approach to achieve the same ends. The Netherlands and Spain, for example, have introduced targets which are neither binding nor accompanied by sanctions; the former has also introduced a voluntary charter to encourage companies to increase female representation. The other significant strand of action has been to use corporate governance codes to drive changes in behaviour—this has been the preferred course in Sweden, Germany, Poland, Luxembourg and the United Kingdom.

Source: European Commission, Women in economic decision-making in the EU: progress report, 2012[13]

6. The Government have supported strongly the case for a voluntary approach to solving the problem in the United Kingdom. In The Coalition: our programme for Government, produced shortly after the 2010 election, they committed to "[promoting] gender equality on the boards of listed companies".[14] The Government subsequently appointed Lord Davies of Abersoch to lead a review into how obstacles to the participation of women on boards could be removed. In his March 2011 report Lord Davies advocated a voluntary approach and set out a number of recommendations, including that companies should set targets for the number of women on their boards in 2013 and 2015, with the aim of a minimum of 25 per cent female board representation by 2015.[15] He also recommended measures to change corporate culture in recruitment and reporting.

7. In March 2012, Lord Davies produced a follow-up review.[16] This was accompanied by an independent Female FTSE board report 2012, produced by the Cranfield School of Management.[17] The findings showed that 27 per cent of all board appointments had been filled by women during the preceding 12 months and that only 11 all-male boards remained in the FTSE 100. Jo Swinson MP, Minister for Employment Relations and Consumer Affairs in the Department for Business, Innovation and Skills, and Minister for Women and Equalities in the Department for Culture, Media and Sport, also reported on progress. As of October 2012, 17.3 per cent of board positions in the FTSE 100 were held by women, with only eight boards still all-male.[18] Furthermore, she highlighted that, in the year up to October 2012, more than a third of candidates appointed to boards were female.[19] FTSE 250 companies, though starting from a much lower level, also made progress. The percentage of women on their boards increased by 44 per cent in the period following the initial Davies review, from 7.8 per cent in 2010 to 11.3 per cent in 2012; and the proportion of all-male boards fell from half of companies in 2010 to around a third in 2012.[20]

8. The Government have opposed the introduction of quotas at an EU level. They contend that self-regulation needs to be allowed to demonstrate its potential before legislation is considered.[21] However, they have maintained that they do not rule out quotas if the voluntary approach does not bear fruit. The Minister made clear that "if we cannot achieve the success that we want, it is not as if the Government have forever ruled out countenancing quotas. But very much the preference is that we do this through a business-led voluntary approach."[22]

9. Our report has been produced, following the developments in October 2012, in the context of significant uncertainty in terms of the likely timing, strength and composition of any legislative proposals from the Commission. At such a crucial moment, this issue requires detailed and considered thinking about the potential next steps. In the following chapters, we consider a number of the principled and pragmatic questions that arise from possible legislation. We begin with an exploration of the case for action at both national and European levels, before moving on to consider the range of possible policy measures, including quotas, which could be pursued.

10. Our aim is to consider this issue not just in the context of the Commission's forthcoming announcement, but also in the context of the need to achieve long-term, sustainable change across the EU. We seek to contribute to the debate on possible legislation, and to ensure that negotiations at a European level do not undercut efforts at a national level to improve the diversity of corporate boards. In our work we have been helped greatly by the wealth of written evidence that we received and by those who provided oral evidence to the Committee. We are grateful to all those who contributed.

11. We make this report to the House for debate.

1 Article 8, Treaty on the Functioning of the European Union. This requirement is also reflected in Articles 2 and 3(3) of the Treaty on European Union and Article 23 of the Charter of Fundamental Rights. Back

2 Directive 2004/113/EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services Back

3 Directive 2006/54/EC of the European Parliament and of the Council of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of women and men in matters of employment and occupation Back

4 Communication from the Commission, A strengthened commitment to equality between women and men: a women's charter:
http://ec.europa.eu/commission_2010-2014/president/news/documents/pdf/20100305_1_en.pdf Back

5 European Commission, Strategy for equality between women and men, 2010 Back

6 European Commission, Women on the Board Pledge for Europe, 2011:
http://ec.europa.eu/commission_2010-2014/reding/pdf/p_en.pdf Back

7 European Commission, Women in economic decision-making in the EU: progress report: http://ec.europa.eu/justice/gender-equality/files/women-on-boards_en.pdf Back

8 ibid. Back

9 European Commission, Consultation on Gender imbalance in the EU, May 2012: http://ec.europa.eu/justice/newsroom/gender-equality/opinion/120528_en.htm Back

10 See, for example, Euractiv, Commission puts geneder quota plans on hold, 23 October 2012: http://www.euractiv.com/justice/commission-puts-gender-quota-pla-news-515625 Back

11 See Sky News, Female Boardroom quotas: EU delays decision, 23 October 2012: http://news.sky.com/story/1001576/female-boardroom-quotas-eu-delays-decision;
and Reuters, EU delays vote on quotas for women in boardroom, 23 October 2012: http://uk.reuters.com/article/2012/10/23/uk-eu-gender-idUKBRE89M0NC20121023 Back