The reasons for lack of female representation in top jobs are varied and largely intractable. But there is a powerful business case for addressing the situation and international interest in boardroom gender diversity has grown significantly in recent times. It has now been reported that EU Justice Commissioner, Viviane Reding, will shortly propose decisive legislative action on gender quotas for corporate boards. Does this mean the time for quotas has arrived in the UK?
The Government pledged in the Coalition Agreement to “promote gender equality on the boards of listed companies” and tasked Lord Davies to review the situation. His 2011 report Women on Boards rejected the idea of quotas, favouring self-regulation. One of his main recommendations was for FTSE 100 companies to aim for at least 25% of female board representation by 2015. However, he left the door open for the Government to introduce more prescriptive alternatives if his recommended business-led approach failed to achieve significant change.
Other EU countries have adopted a quota system to bring about change, apparently successfully. Yet in this country, the Government and many employers oppose mandatory quotas, regarding them as a blunt instrument. Progress by way of self-regulation has, however, been slow. The annual review following the Davies report showed that women accounted for 15.6% of all directors within the FTSE 100 (up from 12.5%) and 9.6% within the FTSE 250 (up from 7.8%). The speed of change will clearly need to accelerate if businesses are to avoid more direct measures.
The Government is ushering in changes to the UK Corporate Governance Code in October 2012 dealing with gender diversity (a company will be required to publish its policy on boardroom diversity, report against that policy annually and consider the board’s diversity when assessing its effectiveness) and it has just launched an inquiry into Women in the Workplace looking at this issue. Will these be enough to bring about the desired result and avert intervention in the form of quotas?
Probably not, if the EU has its way. The European Commission is frustrated by the snail’s pace of progress and perceives a lack of commitment among the member states. Only 24 publicly listed EU companies signed a 2011 European Commission pledge to increase the presence of women on boards to 30% by 2015 and 40% by 2020. There is also mounting concern about the widening gap in approach between different EU countries.
The Commission’s proposals could be adopted through majority voting provisions, so the UK will not be able to veto legislation on its own. That explains why Government reacted to the Commission’s move by hastily dispatching a flurry letters to various EU governments who also oppose gender quotas. The issue may soon be out of the Government’s hands, hence the start of a concerted effort to garner support for its position.