Board Diversity

Board diversity, and in particular the presence of women in the boardroom, has seen a number of developments in recent months. There have, for example, been significant developments in the European Union (EU).

Back in March 2012, the European Commission (EC) publication “Women in economic decision-making in the EU: Progress report”
highlighted that, whilst progress had been made in increasing the number of women on corporate boards, nonetheless a quarter of the EU’s largest companies (25%) still had no women on their top-level board.

Subsequently, in November 2012, the EC adopted a law which sets a minimum objective of “40% of the under-represented sex in non-executive board-member positions in listed companies in Europe by 2020, or 2018 for listed public undertakings”, see IP/12/1205 and MEMO/12/860

The main elements of the draft law include that a company which does not have 40 per cent of women on its supervisory board will be required to introduce a new selection procedure for board members which gives priority to qualified female candidates (note the emphasis on qualification, i.e. no one would be appointed to the board just because they are female). It is worth noting that the law only applies to the supervisory boards or non-executive directors of publicly listed companies, due to their economic importance and high visibility (small and medium enterprises are excluded). However, alongside this, there is a provision for a “flexi quota” which is an obligation for companies listed on the stock exchange to set themselves individual, self-regulatory targets regarding the representation of both sexes among executive directors; this flexi quota to be met by 2020 (or 2018 in case of public undertakings), and with companies reporting annually on the progress made.

In order to become law, the Commission’s proposal needs to be adopted by the European Parliament and by the EU Member States in the Council. On 15 January 2013, the draft law successfully passed the Subsidiarity Check (this is where national parliaments give opinions about whether it is appropriate to tackle an issue at EU level or whether it is best left to the Member States).

On 25th January 2013, an EU Press release “Regulatory pressure gets the ball rolling: Share of women on company boards up to 15.8% in Europe” showed an increase in the number of women on boards to 15.8%, up from 13.7% in January 2012. This comprised an average of 17% of non-executive board members and 10% of executive board members with an increase in the share of women on boards in all but three EU countries (Bulgaria, Poland and Ireland).

Countries with quota legislation are in the vanguard of these increases. For example, Italy recently adopted a quota law that requires listed and state-owned companies to appoint one third women to their management and supervisory boards by 2015; and France, which introduced a quota law in 2011, has become the first EU country to have more than one woman on the top-level board of all of its largest listed companies.

However Scheherazade Daneshkhu and James Boxell in their article ‘Evolution not revolution in French companies’ (FT, Jan 2013) point out that none of the CAC 40 (France’s largest companies) are currently headed by a woman. In Germany, the DAX 30 companies all operate voluntary schemes for promoting women but, as Tony Barber points out in his FT article ‘Germany shifts the debate about women on boards’ (January 2013), ‘the rising proportion of women on German supervisory boards – at 16 per cent, a bit above the EU average – obscures the fact that a majority are workers’ representatives, not career executives’.

It seems clear that there is increasing board diversity in various countries and that whilst the pace of change may be slower than some would like, nonetheless change is occurring. Furthermore, developments at both national and international levels should facilitate more board diversity in the future.

Chris Mallin 6th February 2013


1 comment so far

  1. First Flight NED on

    Great points in this post. Board diversity may help directors weigh more accurately the relevant considerations by helping to correct some of their prejudices and biases

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: