The much debated topic of “quotas verses coaxing” in respect of women on Boards came up again this month with the European Commission apparently drafting proposals to mandate that 40% of non-executive board directors should be female by 2020. This draft legislation aims to address what EU officials perceive to be a continuing severe gender imbalance across the 27 member states, with women represented only 13.7 per cent of board positions in large listed companies.
If passed, this legislation would mean little change for several EU countries. France, Italy, Spain and the Netherlands already have national quotas, but in the UK and in Sweden the measure is fiercely opposed and if the measure is passed by the EU, it can be imposed here. As drafted, it would require companies with more than 250 employees or €50m in revenues to report annually on the gender make-up of their boards. Those that miss the mandatory quota would be fined or barred from state aid and contracts.
The EU argues that progress is too slow and too varied across the member states. However employer’s organisations in Europe say the diversity of corporations across the EU is precisely the reason why a “one size fits all” approach is inappropriate.
In the UK the argument is slightly different, Lord Davies set an across the board target of 25 per cent women on FTSE 100 boards by 2015, including executives and non-executives, in his government-commissioned report in 2010. But this was a target not a quota. The latest BoardWatch figures from the Professional Boards Forum show that the FTSE 100 has 17.3 per cent women directors, up from 12.5 per cent in 2010. This is impressive progress and suggests that the UK could reach around 30% plus by 2020.
My take on this is that the UK should work with the EU to modify the quota to 30% from 40% instead of opposing it with such vigour! It looks as if the UK may well reach that level anyway without the additional incentive of quotas and penalties, but other countries, which have had the same time to do so voluntarily, may not reach it, and society should not be patient indefinitely when there are strong commercial and ethical reasons to make this change.
More importantly we should focus attention and investment on making progress with executives and executive directors, otherwise our pipeline of female talent moving into board roles will be fatally fractured just below board level and progress around the board table will be hard to sustain.
According to BoardWatch, 21.5 per cent of FTSE 100 non-executives are women, compared with only 6.6 per cent of executive directors – little higher than the 5.5 per cent at the time of the Davies report. This fracture in the pipeline of talent means that women do not get into ED roles with the frequency that they should and thus are not well placed for NED roles. It suggests that a lot of talent is being lost just when British industry, struggling to recover from a double dip recession, needs it most.
As a non-executive board chair and a director of two organisations, each of which has several female board members, I have first-hand experience of the value a gender balanced board delivers in terms of outcome focus, team working and values. This is supported by the London Business School Research on Men and Women in teams ( London Business School, Gratton, Kelan, Voight et all, 2007) which demonstrates the value add of gender balance in senior teams. If the percentage of female executive directors does not rise, the percentage of female non execs will not be sustainable. As it is, I suspect this is a small no of women with multiple NED roles. Do you agree and what action do you think can be taken to achieve the greatest positive effect?
- Women on Boards, February 2011, Lord Davies of Abersoch. Figures relate to 2010
- FT.com 3rd September 2012
- Lehmann Brothers centre for Women in Business, London business School, Prof Linda Gratton et All Innovative Potential , Men and Women in teams 2007.