Out-Law News 2 min. read

European Commission consults on quotas for women on company boards


Mandatory quotas for female participation on the boards of large European companies could be introduced to tackle their persistent lack of gender diversity, the European Commission has announced.

A new consultation, running until 28 May considers possible measures for publicly listed companies which could also include self-regulation or recommendations. It also asks whether companies who do not meet any target should be subject to penalties.

Last year, EU Justice Commissioner Vivian Reding called on European publicly-listed companies to make a voluntary commitment to increasing the number of women in their boardrooms. However, only 24 companies signed the Women on the Board Pledge for Europe, committing themselves to a target of 30% female representation by 2015 and 40% by 2020, she said.

"Despite our calls, self-regulation so far has not brought about satisfactory results. The lack of women in top jobs in the business world harms Europe's competitiveness and hampers economic growth," she said.

Female representation on company boards across Europe's top companies has slightly increased from 11.8% in 2010 to 13.7% under the latest figures, according to a report (28-page / 385KB PDF) published by the European Commission. However, at only one board member in seven it will take more than 40 years to reach a significant gender balance of at least 40% of each sex if the proportion of female board members increases at the same rate.

The report highlights big differences between member states. Women make up more than one quarter of boards in some Scandinavian countries, but only 3% in Malta and 4% in Cyprus. Women make up 16% of the boards of the largest companies in the UK, according to the report.

Last year Lord Davies led a review into gender diversity on company boards in the UK and recommended that the FTSE 100 leading companies by share capital should aim to have at least 25% female representation by 2015. He also suggested that the top 350 companies set out the percentage of women they aim to have on their boards in 2013 and 2015.

Corporate law expert Martin Webster of Pinsent Masons, the law firm behind Out-Law.com, published a report in August that analysed the announcements from the UK's 100 leading companies to see how many of them had made their intentions public. He found that only eight of those companies had said that they intended to meet Lord Davies' targets, although a further 12 companies had already met or exceeded the commitment without making any formal announcement.

"Corporate Britain is fairly united against the idea of quotas. Despite that, the response to the Davies targets has been no more than lukewarm," he said today. "It may be that Commissioner Reding's threat of quotas will act as an added stimulus to get more female representation in boardrooms and especially to see more women in senior management."

The Davies Report highlighted the experience of other countries on improving gender diversity in the boardroom. It pointed out that when Norwegian companies failed to meet a target of 40% female representation on board by 2005, legislation was passed with the threat of fines or closure for non-compliance. The target was achieved by 2009.

Earnings at companies with at least one woman on the board are significantly higher than in those with no female board members, according to a survey of Europe's 290 largest publicly-listed companies by global accountancy practice Ernst and Young.

Several EU member states including Belgium, France, Italy, the Netherlands and Spain have already introduced rules on gender quotas for company boards, while other countries have insisted on gender balance on the boards of state-owned companies, Reding said. This could mean that companies operating cross-border would have to comply with national quota laws if they wanted to bid for public contracts, she added.

"Personally, I am not a great fan of quotas. However, I like the results they bring," she added. "I believe it is high time that Europe breaks the glass ceiling that continues to bar female talent from getting to the top in Europe's listed companies. I will work closely with the European Parliament and all member states to bring about change."

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