EU promotes gender balance on company boards

Sep 04, 2012
<p>New legislative proposal drafted to impose 40 percent quota for women on boards of Europe&rsquo;s largest companies by 2020</p>

Last year, Viviane Reding, the EU’s commissioner for justice and fundamental rights, launched an initiative aimed at countering the strong gender imbalance that prevails within the European corporate landscape.

The Women on the Board Pledge for Europe demanded that large listed companies take voluntary action to increase the proportion of women on their board, targeting a level of 30 percent by 2015 and 40 percent by 2020.

Unfortunately, the voluntary scheme yielded limited results. A report from the European Commission published last spring showed that women account for only 13.7 percent of board members, a small improvement on 2010’s level of 11.8 percent.

The initiative has recently been taken to the next level, with Reding expected to introduce a legislative proposal next month. ‘I am not a big fan of quotas,’ she declared last March, ‘but I like the results they bring.’

According to the draft proposal, seen by the Financial Times, companies with more than 250 employees or more than €50 mn ($63 mn) in revenue will face fines and other sanctions such as being barred from public contracts or becoming ineligible for EU subsidies, should they fail to report on their gender ratios or miss the mandatory quotas.

The UK and Sweden, which are strongly opposed to the initiative, would be unable to veto the project. Indeed, the EU voting rules require this type of legislation to be passed by a complex qualified majority rather than by unanimity.

Several European countries including Belgium, France, Italy, Spain and the Netherlands have already adopted legislation on gender quotas. In France, their introduction in 2011 led to an increase by 10 percentage points in one year, bringing the proportion of women on company boards up to 22 percent.

Denmark, Finland, Greece, Austria and Slovenia have adopted similar rules for the boards of state-owned companies. Norway, although not an EU member, imposed a 40 percent quota for women on boards in 2003 and now has the world’s highest female representation at executive level, with 42 percent.

Researchers have previously found a number of strong links between gender balance and improved performance, innovation and corporate transparency.

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