We don’t need the EU to legislate for women on boards
I N A closed meeting in Strasbourg yesterday, European commissioners heavily criticised a package of reforms proposed by the commissioner for justice Viviane Reding. Among the proposals she put forward, Reding argued for a compulsory 40 per cent quota for female non-executive directors across the EU by 2020, reporting requirements for medium-sized businesses, and fines for non-compliance. A compromise now looks likely.
Many studies demonstrate that gender balanced boards perform better on average than male dominated ones. And in an increasingly competitive executive jobs market, the UK must make sure it captures the best talent in corporate leadership. However, at the last count, the proportion of women on boards of FTSE 100 companies stood at only 15.6 per cent. There’s no dispute that Britain has a problem.
To date, however, the UK has opted against rigid enforcement of more diversity. In February 2011, the government released a report written by Lord Davies (former chairman of Standard Chartered), which made several sensible recommendations. These included greater transparency of board-level gender diversity policies and a voluntary 25 per cent quota for female directors by 2015. And this softly-softly approach has so far proven successful. In the last year, the proportion of women on FTSE 100 boards increased by 25 per cent.
According to Reding, however, “self-regulation has not brought about satisfactory results”. The UK, and other European countries, have not gone far enough. But she is wrong.
Policymakers are faced with two big challenges. Firstly, women drop out of work for family reasons and because of the historic gender imbalance of graduates, there may not be enough board-ready women in work to create a meaningful gender balance.
Secondly, if women are appointed to a board only as a function of positive discrimination, they are unlikely to be taken seriously by existing board members (male and female). Given that the ultimate purpose of any reform is to give women more of a say on how companies are run, this would be a devastating outcome. The ideas behind Reding’s proposals completely miss these points.
Like all meaningful solutions, the UK’s current approach will take time, but ultimately it will work. What Reding is proposing is rushed, unhelpful, top-down regulation, which would undermine women and impose further red tape on the sorts of businesses we should be helping at the moment.
Once again we have had a near miss with ill-thought-out, untimely and unhelpful idea for regulation from Brussels. Any compromise should be heavily weighted towards maintaining the status quo.
In his upcoming renegotiation of Britain’s relationship with Europe, the Prime Minister should have cautionary tales like this at the forefront of his mind.
Richard Mabey is research secretary of the Bow Group. He tweets at @RMabey