According to a report by the Financial Times, the EU is preparing to launch a proposal on gender quotas in October.
The FT’s James Fontanella-Khan reported that, by 2020, the boards of Europe’s listed companies will have to be 40% female if the proposal is approved. The move comes after the EU’s justice commissioner Viviane Reding declared that while she doesn’t like quotas, they get the job done when it comes to boardroom gender balance. She suggested that if companies didn’t begin to make their own changes, the EU might force those changes upon them.
Companies did little more than call her bluff, and to their surprise, in March of this year, she said that not enough had been done in terms of gender diversity and quotas were on the way.
Norway was the first of Europe’s countries to enact their own gender quotas in 2004 and a few others, like France and Spain, have followed suit. Still others, like the UK and Germany, have fought the move toward government mandated gender quotas for corporate boards, preferring to let companies or industries set their own targets.
The proposal would have to be approved before becoming law in all 27 of the EU’s member states – but, Fontanella-Khan says, it may pass. He writes, “However the proposal, expected to be formally introduced by Viviane Reding, the EU’s justice commissioner, next month, can be adopted by the EU through its complex majority voting process, meaning neither the UK nor Sweden would be able to veto its passage.”
In contrast, a New York Times piece by James Kanter suggests that passage of the proposal may be more difficult. He writes, “The legislation would still need approval from the Union’s 27 governments and the European Parliament, and some powerful sections of industry have continued to warn against a system of mandatory quotas.”
Companies with more than $250 employees or with more than €50m in revenue would have to report on the gender composition of their boardroom. Companies that failed to meet quota expectations could be “barred from state aid and contracts,” Fontanella-Kahn writes.
Kanter adds that the proposal “would require state-owned companies to name women to 40 percent of the seats on supervisory boards by 2018,” whereas publicly listed companies would have until 2020.
As could be anticipated, industry spokespeople have come out in opposition to the proposed boardroom gender quotas.
Pedro Oliveira, legal adviser at Business Europe told the FT, “One-size-fits-all quotas interfere disproportionately with the freedom of companies and shareholders to organise their own affairs,” He continued, “They disregard the highly diverse conditions in different sectors/companies and do not take into account the way corporate boards function and are renewed.”
Similarly the NY Times quotes Kimberley Lansford, a senior policy adviser at the European Round Table of Industrialists, “Big divergences among sectors and national traditions mean any measures must remain voluntary.”
Finally, Professor Renee B. Adams at the University of South Wales says that while gender diversity is a good thing, mandating it may not be as successful as governments hope.
“Our research has revealed benefits that women bring to boards: notably conscientiousness, better corporate governance and performance accountability. Women also appear to be tougher monitors of management. The likelihood that a CEO will get fired if performance goes down is higher when more women are on the board,” she writes.
But at the same time, it may bring changes to companies that some may find difficult.
“Some senior managers may decide that they’re happier working with men. Perhaps they enjoy going off to football games after board meetings and believe that women wouldn’t enjoy that sort of bonding. Sometimes people just work better with particular types of people. If that means men and the company is operating well, then that’s a perfectly valid approach, if regrettable from an equal opportunity point of view.”
What Adams fails to understand is that these discriminatory behaviors are exactly what gender quotas are set up to combat. Gender discrimination breeds groupthink and inefficiency, and leaves companies out of touch with a changing marketplace.