Women in boardrooms: have the zombies won?
European Union justice commissioner Viviane Reding recently surprised herself, and the world, too. She walked up to the microphone, after having rehearsed all morning before her bathroom mirror an announcement to bring in quotas for women in company boardrooms. She had threatened as much a year ago, when she said that she would use ‘regulatory creativity’ if, after 12 months, there was no improvement in companies’ performance. But, despite there being practically no improvement in numbers, her mouth formed an ‘O’, and words deserted her... until she filled the silence by announcing the sort of thing she would usually scorn, a typically EU compromise - a consultation! Only then did the words tumble out.
Reding-watchers gasped. Had the commissioner, known for her single-minded pursuit of citizen-friendly goodness, lost the struggle to maintain her feisty soul against the mists of conformity that swirl through European commission corridors? They looked for spots on her face, zombie eyes and other signs of defeat.
The facts are all there to support her original intentions, as laid out in the progress report on Women in economic decision-making in the EU, which accompanied the consultation. Among a range of studies, it cites one which shows that companies with the most gender-diverse management teams had 17% higher stock price growth between 2005 and 2007 compared to the industry average, and their average operating profit was almost double the industry average between 2003 and 2005.
Another says that a gender-balanced board is more likely to pay attention to managing and controlling risk. Nevertheless, in January 2012, women occupied on average just 13.7 % of board seats of the largest publicly listed companies in EU member states. Depressingly, in nearly a third of member states - mostly rather small ones - at least half of the largest companies have boards with no women. And the figures for chairs of boards are even worse: women hover around the 3% mark. (Looking worldwide, though, the EU does not do too badly - worse than the USA, but better than everywhere else, and certainly better than Japan where women make up just 0.9% of board members.)
If a country has a quota - prepare yourself for a surprise - its performance improves. For instance, France, which adopted a legal quota in January 2011, saw the biggest improvement. France’s quota is 40% by 2017, with an intermediate target of 20% by 2014. The proportion of women on the boards of French companies in the CAC 40 index (the country's stock market index) in January 2012 had increased by 10% to 22.3%, up from 12.3% in October 2010. This change alone makes up more than 40% of the total change EU-wide.
France is not alone: Italy and Belgium also have quotas, following in the footsteps of Norway which has seen comprehensive compliance with a 40% quota passed in 2003. The Netherlands and Spain have also passed laws, but their rules are not binding or tied to any significant sanctions. In the Netherlands, for instance, the requirement of achieving a 30% representation of each sex among board members in big companies is combined with a "comply or explain" mechanism.
We all know that quotas are controversial. No one likes to lose out in an application because of not being the right race, gender or whatever else is in contention, just as winning a place because of a quota can undermine esteem. The political reaction in the European parliament showed the differences in approach - for instance, Greens pro, Conservatives contra. But, as we have seen with France and Norway, quotas work. The one sign that commissioner Reding was still fighting for her soul against the zombies was when she said: 'Personally, I am not a great fan of quotas. However, I like the results they bring. We need quotas to break the glass ceiling before returning to normal, but what is needed is a change in corporate culture and its mode of governance.' The consultation itself (deadline: 28 May 2012) does not dare mention the word, but asks at one point whether the percentages should be binding and enforced by sanctions, which is the same thing.
For dedicated followers of company law, there is a lot going on in the field besides quotas for women. In fact, commissioner Reding is dealing only with this aspect because it falls under her portfolio for equality. Over in DG Internal Market, there are several more developments, principally a consultation just issued on the future of European company law (deadline: 14 May 2012).
Reding-watchers will be on the lookout for future signs. Normally, she tosses aside objections from member states with an exasperated flick of her wrist. But, as we all know, the zombie clique usually wins out in the end.
Jonathan Goldsmith is secretary general of the Council of Bars and Law Societies of Europe, which represents about one million European lawyers through its member bars and law societies. He blogs weekly for the Gazette on European affairs