UK threatens firms with gender quotas as women’s appointments fall

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This article is part of our special report Corporate Governance.

SPECIAL REPORT / The British government, which has staunchly opposed EU efforts to set gender quotas for corporate management, has warned it could introduce quotas if British companies fail to appoint more women to their boards.

The move could give renewed impetus to the gender quota proposal launched last November by EU Justice Commissioner Viviane Reding, which was heavy criticised by Britain.

“Companies should be under no illusion that [the UK] government will adopt tougher measures if necessary,” UK Business Secretary Vince Cable told the daily Standard on 10 April.

“Quotas are still a real possibility if we do not meet the 25% [UK] target,” Cable added.

The warning came in the wake of a report also published last week indicating that the pace of women’s appointments to UK boards is slowing.

UK appointments for women fell off last year

Published by the Cranfield School of Management, the report found that during the second half of last year the number of women appointed to boards of the 100 largest listed UK companies fell from 44% to 26%, whilst female appointments to the boards of the next 250 largest UK listed companies also fell from 36% to 29%.

Cable said UK ministers continued to believe a voluntary led approach was the best way to bring equality, but threatened companies with "tougher measures" – and quotas – to force women on to boards if firms would not appoint them voluntarily.

Reding proposed legislative action on gender quotas for corporate boards after her calls to take voluntary steps to increase the number of women on boards to 40% by 2020 failed to deliver tangible results (see background).

Her draft directive set the objective of achieving 40% women in non-executive board-member positions in publicly listed companies, with the exception of small and medium enterprises.

Targets should be reached by 2020

Companies with fewer than 40% of women in such positions would be required to make appointments by applying clear, gender-neutral and unambiguous criteria, and to prioritise the appointment of women where candidates are equally qualified.

Such a rule would aim to reach the 40% target of women in non-executive positions by 2020 for private companies, whilst public undertakings would be expected to reach the target more quickly, by 2018.

Companies would face fines and other sanctions for failing to comply.

Cable’s warning suggests that the UK could modify its strong resistance to Reding’s proposal.

Parliament backs Commission plan

On 13 March the European Parliament backed the Commission’s pledge to create binding rules to increase the number of women in top jobs, if member states have not voluntarily taken action to redress gender imbalance in the workplace.

Even though some European countries – including Belgium, France, Italy, the Netherlands and Spain – have set targets for corporate boards, Britain and Sweden have led the charge against introducing quotas. 

One of the Cranfield report’s authors, Susan Vinnicombe, said: “At Cranfield we have stood steadfast against quotas on the basis that chairmen must understand the benefits of gender diversity and commit to achieving it.”

She said that Reding’s proposal would be the only alternative if companies continued to ignore voluntary measures.

“Unfortunately, too many chairmen choose to ignore the issue in the false hope that it will go away. Viviane Reding’s demanding legislation is on its way and it goes far beyond [UK] recommendations,” Vinnicombe said in a statement on 11 April.

She added: “It is becoming a matter of urgency for those companies that do not have a gender balanced board to let go of their board stereotypes and appoint more creatively.”

“It is just not good enough that men continue to dominate the boardrooms of our top companies,” said UK Minister for Women and Equalities Maria Miller“This is not about political correctness it’s about good business sense. Businesses must act now to harness women’s full potential and to help maximise Britain’s economic growth.”

Zita Gurmai, a Hungarian MEP sitting with the Socialists & Democrats group in the European Parliament, is also president of the party's women's group. She said: “Aspirations are not enough. We need concrete targets to be met [40% of women on boards] and concrete consequences if those targets are missed. The crisis must not be an excuse for not including more women in decision-making positions.”

Viviane Reding, EU commissioner for Justice and Fundamental Rights, launched a “Women on the Board Pledge for Europe” in 2011, calling on large companies to increase the women present at the board level to 30% by 2015 and to 40% by 2020.

Reding promised to consider legislative action if the self-regulatory initiative did not yield results by March 2012. She later acknowledged the voluntary action had failed.

In November 2012, the European Commission proposed a 40% gender quota legislation, which would apply to publicly traded companies in all 27 member states.

>> Read: Reding pushes 40% female quota on corporate boards

  • June 2013: ?EU Commission to assess results of the consultation and come up with appropriate measures

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