A new European Commission (EC) proposal would force public
companies to appoint women to 40% of their non-executive board
seats by 2020.
Companies that fail to do so face administrative
fines and other penalties.
But not everyone agrees with the draft proposals,
with some saying they could make the EU a less attractive
destination for multinationals to set up business.
Businesses would look at the quotas and think
its another hurdle we have to comply with, its too
difficult so were going to stay out of the EU, said
Clodagh Hayes, a partner with Linklaters in London.
The rules, championed by the EUs justice
commissioner Viviane Reding, would target companies with more
than either 250 employees or 50 million in revenues.
The rationale is that gender diversity on corporate
boards leads to better decision-making. According to recent statistics from the EC, women account for
just 13.7% of board members in large listed companies
some way off the ECs latest target of 40%.
But according to Hayes, who is against the concept
of mandatory quotas, there needs to be a social, rather than a
legislative, change. Hayes said she was fundamentally opposed
to quotas because they lead to the suspicion that a woman has
been appointed only because the company is legally obliged to
Fraser Younson, partner with Berwin Leighton
Paisner in London also said that this could be a bit of an
own-goal. Women want to do it on their own merit, not
because of their gender, he said.
Under UK rules, it is illegal for companies to
discriminate positively between genders. The Equality Act carves out a limited exception
when there is a male and female candidate that are both of the
same calibre. As a tie-breaker, the company can positively
discriminate in favour of the candidate that belongs to the sex
that is underrepresented in the business.
In contrast, Younson said the quota system would
require compulsory positive discrimination.
But, asked about whether such quotas lead to
tokenism, Amsterdam-based Baker & McKenzie partner Mirjam
de Blécourt said this was a non-argument. Anyone
who is chosen would have to prove themselves: if they
dont do a good job they will be gone within a
month, she said.
In an article this week, the Financial Times said
that it had obtained a copy of the legislation.
Progress in the share of women on company
boards is very slow, with an average annual increase of just
0.6 percentage points over the past years, the draft
directive reportedly states. The rate of improvement in
individual member states has been unequal and has generated
highly divergent results.
There is great uncertainty about how the 40%
threshold will be reached in just eight years.
According to Younson, 40% is such a challenging
target that it will probably get watered down to 30% as the
proposal makes its way through the EU legislative process.
Hayes also said that 40% is high in terms of where
the pool of talent will come from, and may lead to firms having
the same women on multiple boards rather than increasing the
pool of candidates.
Traditionally, there is opposition to having
lawyers on boards, but actually a lot of the executive women
tend to be in the legal world, said Hayes.
Companies may need to look beyond the traditional areas
of accountancy, banking and business people.
Some also believe the focus is on the wrong thing,
saying that if the EC really wants diversity in the company
rather than the board, it must focus on the executive rather
than non-executive level.
Of the 163 women who are directors of
Britains top 100 companies, 20 are executive directors
and 143 are non-executive directors.
To date, the UK approach has been voluntary, with
the prevailing view being that there should be an organic
pipeline of talented executive women to make it up to board
level. This is best achieved by championing active
sponsoring and mentoring of female candidates that are more
likely to get into executive positions as opposed to being an
appointee in a non-executive position, Younson told IFLR.
According to Younson, if the directive requires
directorship with no distinction between executive and
non-executive directors, companies could simply load the number
of non-executive positions to meet the quota and avoid a