UK: Gender balance on boards without the EU

By Hana Afifi and Nerea Reparaz.

The European Union will take over the regulation of women’s accession to company boards by the end of 2013, unless disagreements over how to increase women representation fail the new legislation. While France is complying with the proposal, the United Kingdom refuses EU regulation on the matter.

The conference room inside the European Parliament is witnessing engagement from Members of European Parliament (MEPs) and journalists fighting for women’s rights during the “Women’s response to the crisis” conference held on March 6. Women’s representation on boards comes up: the future is uncertain. While the member states agree in principle over gender equality, they dispute on whether each member state should apply it independent from EU regulation and how, with France and the UK on both ends.

Viviane Reding, EU Commissioner for Justice, Fundamental Rights and Citizenship proposed a legislation (directive) in November 2012 that sets a 40% minimum of women on non-executive boards of EU-listed stock exchange companies to be achieved in 2020. The proposal had stirred controversy even before being completely drafted, as objections from 10 member states where sent to Reding.

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Whether the EU or the member states should implement measures for increasing women on boards is perceived differently by France that is complying with the Union, and the United Kingdom that refuses  any EU regulation on the matter.

The directive is open for equally effective action on the member state level. “If they manage to get there, they are fine, they do not need to apply the directive,” says Mina Andreeva, spokesperson of Viviane Reding.

“There was only a 0.6% improvement in the number of women on boards last year,” according to the European Economic and Social Committee (EESC) Opinion on the proposed legislation, in reference to the effect of the voluntary measures by member states for increasing women on boards.

As stated in the Opinion, France is the only country that is on track for achieving the 40% objective in due time. According to Andreeva, this is due to a well-developed childcare system, which helps with balancing work and private life.

France is one of only four member states who have imposed legislation for gender diversity on boards with sanctions for non-compliance. According to French Henri Malosse, President of the Employers at the EESC, a law was voted by Former President Nicolas Sarcozy two years ago and by 2017, non-complying companies will have penalties.

While France is already following the proposed directive, the United Kingdom wants self-regulation. In 2010, the percentage of women on boards on FTSE 100 (index of blue-chip stocks on the London Stock Exchange) companies in Britain was only 12.6%, as announced by Mathhew Hancock, Business, Innovation and Skills Minister at the House of Commons on January 7.

“The government is committed to increasing the number of women on boards,” said Hancock, but he refused EU regulation, as he claimed it did not respect the subsidiarity principle, which is the principle that the EU should intervene when action is not effective on the member state level. “Why should this be dealt with by the European Union? ” said Conservative Member of Parliament (MP) Jonathan Djanogly at the House of Commons of the British parliament whose MPs agreed on the motion.

 

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Dispute over the concept of a “quota”

While the quota – the minimum percentage of representation for women – in the     directive proposal is seen by some as undermining women’s competence and as interference with business, others believe it is necessary.

Madi Sharma, who drafted the EESC Opinion supporting the proposal, was herself against the quota, as she did not want to be on a board just to fulfill a quota; but she realized it was essential.

“There is no existing historical example of a company that has reached 40% without quotas,” said Sylvia Walby, Distinguished Professor of Sociology at Lancaster University and UNESCO Chair in Gender Research.

If by 2020, companies do not fulfill the quota, they will not be immediately sanctioned. They will have to publish information about the transparency of the selection procedure and how they tried to recruit women. The sanctions will apply if the company fails to provide such explanation.

While quotas are complied with in France, the British system is skeptical about it. David Cameron stated in January 2013 that he does not prefer quotas but that they remain an option if voluntary measures turn out to be ineffective, according to The Telegraph. Last year (2012), the Government canceled plans to set quotas for women representation on British company boards.

The Lord Davis report, a UK report about women representation on boards, issued in 2011, had defined a quota between 30% and 35%, which stirred debate in the country. Yet, the member state refuses the EU directive.

“It’s not a fixed quota, it’s a procedural quota. It takes account of talents, places focus on the transparent selection procedure and it has even [a] clause which leaves [for] member states room to demonstrate they can arrive there with their own system,” says Andreeva, adding, “Which EU legislation do they support recently? [..] This is a very ideological issue for them,” in reaction to the British stance.

According to The Telegraph, the British Cooperative Group announced in March that it commits to achieving a representation of women on boards of 40% by 2018.

The need for quick measures – be it on European or member states’ level

According to the Annual Growth Survey, the presence of women on company boards improves the economy and boosts the GDP of member states, as shown in Figure 2.

 

“Had we had women on boards of banks, we had to question if we had had the same economic crisis,” says EESC member Madi Sharma, adding that having balanced boards increases share prices, transparency and decision-making processes.

Women still face discrimination in the selection procedure. According to the European Parliament Eurobarometer Flash Survey issued on 26 February 2013, the 1st criterion for the woman is the fact that she has children while the professional experience comes in the 7th place. For men, the 1st criterion is the professional experience and the criterion about children comes in the 10th  place.

86.3% of board members are men, which hinders the possibility of recruiting women, as the networks of men enable recruiting more men on boards rather than women. Some companies argue that not enough women apply for jobs on boards. However, Viviane Reding prepared the “Global board ready women” database that lists 8,000 women qualified to work on boards.

 

The proposal faces rejection, but the EU is progressing

The directive proposal is awaiting the 1st reading where the Women’s Rights and Gender Equality Committee at the European Parliament will vote. In June 2013, the proposal will be discussed by the Employment and Social Affairs Council in the Council of Ministers. It will be applied only if both the parliament and the council adopt it.

“Now the Proposal is on the table. First, we expect everyone to read the proposal in order to be able to have a factual discussion, not an ideological discussion,” said Mina Andreeva.

Women's response to the crisis workshop. 6th March 2013
Women’s response to the crisis workshop. 6th March 2013

The UK, Germany, France and Italy each have a number of 29 votes in the Council of Ministers, constituting the largest votes. While the first two are against the directive, the latter are for it.

“It is too early for governments to decide their position,” said Evelyn Regner, commenting on the recent announcement by Germany on March 6 (2013) that it is against the directive proposal.

 

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