Will Europe’s women on boards quota work?

Author: Danielle Myles | Published: 15 Nov 2012
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Viviane Reding
Lawyers welcomed yesterday’s proposed directive from the European Commission (EC) implementing a watered-down version of the controversial women on boards quota put forward earlier this year.

But there are hesitations over how effective the plan will be in boosting female representation where it is needed most – executive roles.

Yesterday’s proposed legislation imposes a non-binding target on larger listed companies to have women in 40% of their non-executive director roles by 2020. European justice commissioner Viviane Reding had initially pushed for a mandatory 40% target with tough EU-level sanctions.

"The original proposal was too inflexible. This will be easier for companies to work with," said Linklaters partner Clodagh Hayes.

The softer, objective-style quota was needed to gain the political support necessary to become law. Reding’s original plan was widely criticised for encouraging tokenism, including by the only two FTSE 100 female CEOs.

Under the EC’s plans, European listed companies with at least 250 employees or $50 million annual turnover must apply non-discriminatory objective criteria when appointing non-executive directors.

It means that when two equally-qualified candidates of different gender are being considered for the role, the under-represented – or female – candidate should be hired.

This tie-break system is similar to that seen in the UK Equality Act. The difference is that the EC directive necessitates the tie-break, whereas the UK statute provides it as an option.

Considering the most ardent opposition to Reding’s enforced quota came from the UK, use of an English law concept goes someway in making the directive more acceptable.

"You can see how Reding tweaked that accepted principle, by making it mandatory rather than an option (as it currently is in the UK)," said Fraser Younson, partner at Berwin Leighton Paisner in London

"It’s more difficult for the UK to object now because the new Reding proposals now allow the best qualified person to be appointed to the role," he added.

There are, however, questions over how effective the directive will be in breaking the so-called glass ceiling.

First, the changes are focused on supervisory or non-executive positions. Increasing the number of women in senior decision-making roles requires a stronger emphasis on executive directors.

"Getting the executive balance is going to be trickier than with non-executive roles," said Hayes.

Here, the directive improves on Reding’s original plan. It includes a so-called flexi quota, which is a voluntary obligation to set executive director targets.

This is similar to the Australian model which has produced impressive results in a relatively short period of time, according to a note prepared by Paul Hastings partners Tara Giunta and Suzanne Horne.

Second, the 40% goal by 2020 is still ambitious, and it’s not clear there is a pipeline of female candidates wanting to fill these roles.

See also:

'Asia Women in Business Law Awards 2012: shortlist revealed’ http://www.iflr.com/Article/3098257/Search/Results/Asia-Women-in-Business-Law-Awards-2012-shortlist.html

'Women on boards quota to threaten Europe multinationals?’ http://www.iflr.com/Article/3085297/Search/Results/Women-on-boards-quota-to-threaten-Europe-multinationals.html

'Gender balance within listed companies in Italy’ http://www.iflr.com/Article/3006770/Gender-balance-within-listed-companies-in-Italy.html