CHAPTER 3: quotas |
44. Having established the clear case for action,
we must consider what form that action should take. We start with
the issue that has attracted the most attention in this sphere:
legislative quotas for gender diversity on boards.
45. Quotas are legal mechanisms that require
companies to ensure that a specified proportion of boards are
made up of the gender least represented, and are often accompanied
by sanctions to punish non-compliance. Legislative quotas of that
kind have been established already in a number of European states
(both EU Member States and not), as laid out in Table 1.
They are also one of the options that have been considered by
the Commission as part of its consultation process.
46. The Government's position was clear. They
supported a voluntary, business-led approach, but reserved the
option of quotas as a backstop:
"What we have said is that, for all sorts of
reasons, we do not think that quotas are the right way forward.
We have also said that clearly, if the voluntary business-led
approach does not work, we will need to look at all options, and
that includes quotas. But the Government's clear view is it believes
that the voluntary approach will work."
47. The Government's stance was particularly
firm with respect to proposals at an EU level. Fundamentally,
they disputed the Commission's power to legislate, as discussed
above (see paragraph 24). On a pragmatic level, they also considered
Member State governance structures too varied for a single approach.
Caroline Normand, Deputy Director for Corporate Governance at
the Department for Business, Innovation and Skills, noted that
"crude one-size-fits-all measures are not really likely to
work as effectively as each country deciding what works for them
from where they are starting, given the kind of system that they
have, and then taking that forward."
Furthermore, the Government did not support fundamental change
at a point when a business-led approach was being championed.
These points were echoed by Lord Davies of Abersoch.
The French government, despite having national quotas in France,
agreed that EU action should begin with non-legislative measures.
Legislative quotas adopted in European
|France||40 per cent women board directors (if fewer than 8 directors, the difference between genders cannot be greater than 2).
||Publicly traded or non-listed companies that have >500 employees or revenue >50m
||Fees will not be paid to directors in companies not in compliance
||January 2011||January 2017
(an interim quota of 20 per cent must be reached by January 2014)
|Italy||33 per cent of the gender least represented
||Publicly traded||4 month period to rectify, before fines are levied (starting at 20,000); then an additional 3 months to comply before elected members lose their office
||June 2011||Not specified
|Austria||30 per cent women board directors
||2018 (an interim quota of 25 per cent must be reached by 2013)
|Belgium||33 per cent women board directors
||Publicly traded companies and state owned enterprises
||If the board comprises fewer of the gender least represented than the quota requires, any newly appointed or re-appointed director of the majority gender is void. If the situation remains after a year, all benefits and compensations for board members are suspended until compliance is achieved.
||September 2011||Varies, based on company type and fiscal year start. State owned enterprises: 2011-12; publicly traded companies: 2017-18; small publicly traded companies: 2019-20.
|Norway||40 per cent women board directors
||Publicly traded companies and state-owned enterprises
||Possible refusal of registration, fine or dissolution
||December 2003||2006 (state-owned enterprises); 2008 (publicly traded companies)
48. Many of our contributors shared this opposition
to quotas. Some opposed them on principle.
The National Association of Pension Funds (NAPF), an umbrella
group for institutional pension fund investors, called quotas
"blunt, unsophisticated instruments, which address the symptoms
of an issue as opposed to solving the root cause".
It felt that quotas ignored the "underlying problem of women
coming through the senior management pipeline".
The 30% Club pointed to the low number of women in executive positions
in Norway as evidence of their lack of effectiveness: despite
44 per cent of board members being female, the same is true of
only 8 per cent of Norway's Chief Executive Officers.
The Confederation for Norwegian Enterprise (NHO), a Norwegian
business organisation, noted simply that stronger evidence within
the EU was required to take forward legislative action at this
49. To some, quotas were patronising or tokenistic,
and risked undermining the perception of women in senior positions.
For Lesley Brook, co-founder of Brook Graham, a diversity and
inclusion consultancy, quotas "would just create a round
of questioning, doubt and noise, which, frankly, we do not need".
Lord Davies of Abersoch highlighted the fact that 89 per cent
of the 2,600 women who responded to the consultation on his review
opposed quotas. Michael
Reyner, a partner at the executive search firm MWM Consulting,
feared that quotas could lead to "appointments being made
for the wrong reasons and lead to less effective boards."
50. There were also concerns that quotas would
lead to practical problems, with attention drawn again to the
experience of quotas in Norway. Some cited research indicating
that the quotas there had led to a reduction in shareholder value
and a shorter supply of women for executive positions.
Survey data presented by the NHO and by the European Commission
also demonstrated a mixed view of the impact of quotas in Norway.
Moreover, contributors suggested that there were other problems,
such as companies delisting and individual female board members
sitting on a large number of boards.
These claims were queried. The aforementioned survey data identified
that fewer than 10 per cent of board members felt delisting was
an issue; and Elin
Hurvenes, founder of the Professional Boards Forum, an organisation
that seeks to highlight and promote qualified women for board
positions, suggested that the proportion of both sexes sitting
on a large number of boards was broadly the same.
However, different sets of statistics for these questions were
presented by both sides, making true assessment of the situation
51. Dr Barnali Choudhury, Lecturer in Corporate
Law at Queen Mary, University of London, stressed that these disputes
in Norway arose despite a strong culture of quotas and a relatively
limited legislative scope.
Many felt that applying a "one size fits all" solution
across Europe, where such cultural factors varied, would simply
exacerbate the possible disadvantages.
For MWM Consulting, this rendered the case for quotas, "intellectually
flawed at a fairly fundamental level".
52. The 30% Club insisted that a business-led
approach was "ultimately superior", a view that was
It said that an EU quota would be "unnecessary, potentially
harmful and most importantly, would not achieve sustainable business
For these witnesses, the efforts made following the Davies report
had begun to embed a longer-term change in corporate culture.
53. Many pointed to recent statistics to support
this case. The one-year follow-up to the Davies report showed
an increase from 12.5 per cent female board members in 2011 to
15.6 per cent in 2012the largest-ever reported increase
at the FTSE 100 level.
On that basis, the Cranfield Female FTSE Report projected
that female representation could be at 27 per cent by 2015, and
at 37 per cent by 2020.
Progress has accelerated since: from March through to September
2012, the latest period for which figures are available, 44 per
cent of new board appointments were female.
54. Those opposed to quotas felt that this progress
would be jeopardised by the premature introduction of legislation.
NAPF said that it was therefore "sensible" for voluntary-led
change to be given a chance to succeed.
Lord Davies of Abersoch agreed, though he wanted to maintain the
backstop of quotas in case progress was insufficient.
The 30% Club thought that a "quantum-leap stage" had
already been reached.
55. Other witnesses disagreed that there had
been sustained voluntary change. Mary Honeyball MEP, Labour spokesperson
on the European Parliament's Women's Rights and Gender Equality
Committee, called United Kingdom and Europe-wide progress "insignificant"
compared to that in Norway,
where the Fawcett Society noted that female board membership rose
from 6 per cent to 44 per cent in six years.
This demonstrated the significant rate of change that could be
achieved by quotas, which was also acknowledged by critics of
56. For some, quotas represented the only way
to achieve significant progress on female board representation.
This was the key argument for the European Commission in arguing
the need to bring forward proposals.
It was also the basis for the adoption of quotas in both Francewhere
the "disappointing" results of voluntary action prompted
Simon, Director of Legal Affairs at the French business organisation
MEDEF, called them a "necessary evil".
Indeed, the European Commission drew attention to the fact that
almost half of the overall EU increase in female board representation
resulted from progress in France since its introduction of quotas.
For Professor Sylvia Walby, therefore, "what works is
simply an empirical question. It has been quotas which have worked."
The EWL drew particular attention to the power of EU legislation
to change behaviour in recalcitrant Member States.
57. Some contributors also argued that, rather
than being patronising as many opponents claimed, quotas provided
the means to overcome structural inequalities in the labour market.
Professor Sylvia Walby argued that claims about negative
female views on quotas were often anecdotal.
Kate Grussing, Managing Director of Sapphire Partners, an executive
search firm, agreed.
NAWO said it was not "
in the least patronising to
take effective steps to address the current bias in favour of
Hurvenes noted that a "board seat is a valuable company asset",
and that "no chairman or shareholder, in Norway or elsewhere,
would deliberately appoint someone without merit and waste a board
58. Furthermore, it was argued that quotas set
in train longer-term changethe "trigger" for
action, as the EWL put itby
identifying the positive contribution that women could make to
boards and opening the door to further involvement.
The TUC drew comparisons with the cultural shift in the trade
union movement following the use of quotas, citing change there
as evidence of the capacity of quotas to shift cultural mores.
Professor Sylvia Walby also saw them as a driver for changes
in recruitment practice: "quotas push people, recruiters,
to actively seek people where they could easily have previously
filled a position out of people they already know. Quotas address
the question of the issue of the network problem".
59. The arguments for and against quotas were
made forcefully and eloquently during our inquiry. Having considered
the case carefully, the Committee considers that, in principle,
quotas should be avoided. The speed of the change that they can
achieve is counterbalanced by the negative perceptions that they
generate in the business world and amongst many women in senior
positions, as well as their limited impact on the underlying issues
that affect gender diversity. That is not to say that they prevent
sustainable progress; but change is delivered more effectively
when business is engaged with the agenda and takes action at all
levels to address it. As the Minister said, "when you get
companies recognising that this will have benefits for them...that
is going to be a more powerful driver, so it is a better way of
solving the problem".
60. However, simply to oppose any proposals for
a quota, in any circumstances, would be too simplistic. As was
the case in Norway, quotas are ultimately a tool to be employed
where less stringent forms of action are thought to have failed.
As a result, we consider quotas to be a legitimate tool of last
resort, including at EU level, subject to the legal constraints
of the Treaties and ECJ case law on positive action (see Box 2).
To use them at this stage, however, would imply that other approaches
had failed. We do not consider this to be the case at present.
61. This is particularly evident in the United
Kingdom, where we have been impressed by the engagement of both
the Government and the business community, and by the results
of that work. There have also been concerted efforts elsewhere.
We have seen voluntary targets and charters in the Netherlands,
underpinned by the threat of a sanction-based approach, and the
number of women on boards has risen by a quarter to reach 19 per
cent. In Luxembourg,
female board membership rose by 50 per cent to reach 6 per cent
by January 2012, albeit from a very low base, after changes to
its corporate governance regime.
This trend of encouraging greater disclosure from companies as
to their diversity efforts has been mirrored elsewhere (see Chapter
62. There have also been clearer efforts by companies
to address issues of gender diversity. In Germany, for example,
where by 2012 there were nearly a fifth more female board members
than in 2010, DAX 30 listed companies have begun to set targets
for female board representation.
Umbrella bodies such as Business Europe and the Association of
Executive Search Consultants have also sought to foster best practice.
All of this work is being reflected at a European level: female
board membership levels increased by 1.5 percentage points between
October 2010 and January 2012, a noticeable rise compared to the
long-term annual average of 0.6 per cent.
63. Despite these efforts, we do not consider
the number of women on boards acceptable, either in the United
Kingdom or the EU as a whole. It is vital that change continues
and is sustained beyond the hard work of reformers such as Vice-President
Reding and Lord Davies of Abersochespecially in terms of
reversing negative trajectories in some countries. The European
Commission has stressed that "sufficient time has already
been given to the industry to make credible commitments to change
the current situation".
We acknowledge that challenges remain, but the idea that time
has run out, whether in the EU as a whole or particularly in the
United Kingdom, is not convincing.
64. This does not mean we are complacent; we
urge the Government and the Commission to maintain the pressure
to hasten the pace of change. Yet at this stage, when many in
the business community who are supportive of the overall aim of
increasing the proportion of women on boards are vociferously
opposed to quotas, the imposition of EU quotas would risk setting
back voluntary efforts without achieving broader gains.
This is particularly so when the effects of quotas in France and
Italy, where legislation is less than two years old, have not
been studied in detail. Action would therefore lead to a widespread
loss of goodwillthe Minister highlighted "significant
numbers of countries that are not in favour of this particular
This would undermine the excellent leadership role played so far
by Vice-President Reding.
65. Furthermore, given the short timeframe in
which to evaluate the adequacy of this wave of responses from
Member States, we would need to consider carefully whether a proposal
to introduce EU-wide quotas respected the principle of subsidiarity,
even if ameliorating clauses to embed flexibility were included.
We urge the Commission to refrain from proposing legislation that
would seek to introduce a quota mechanism.
66. A better approach would be for the Commission
to make use of a Recommendation, a non-binding statement of recommended
policy action. This should stress the importance of setting a
voluntary national target of at least a 30 per cent level of women
on boards. This would allow the Commission to demonstrate leadership,
whilst reserving its right to take action subsequently should
the response from Member States be inadequate.
67. The Commission could then review progress
after three and five years, with the possibility of legislation,
even at the earlier stage, if there is a clear and continuing
failure to engage. To avoid that outcome, the United Kingdom must
be well beyond the 30 per cent level amongst the FTSE 100 companies
targeted thus far, and the FTSE 250 companies below them, at the
latest by the end of that five-year monitoring point. There also
has to be positive and accelerated rates of change in other Member
States to show that sufficient progress is being made. We note
in support that some opponents of quotas acknowledged the need
to review the case for stronger action should progress stall.
68. This reflects our view that quotas should
remain a serious option of last resort. We have heard of the impact
that the threat of quotas has had on Member States thus far.
It is important that such a threat is not rendered hollow. Whilst
we wish to see sustainable, business-led change, goodwill should
have a limit. The Commission should stand ready to take forward
positive action, adhering to the limits of established EU law,
if the rate of progress does not improve.
69. By taking this course, further action from
the Commission would be on a much better evidential footing and
its negotiating position would be strengthened significantly.
A review period would also offer the opportunity for those in
opposition to quotas to demonstrate the effectiveness of voluntary
approaches. And pragmatically, if progress was to continue, the
impact of any quota would be minimal for those countries and companies
who had engaged seriously with the issue in the years before,
which we hope would include the United Kingdom.
70. We oppose the use of quotas to increase
the representation of women on boards, except as an option of
last resort. Though able to achieve statistical change, quotas
do not address the underlying cause of gender inequality: the
lack of progression of a consistent stream of women into senior
positions. A quota would also be unpopular with many of the women
it would seek to help, and would risk fostering the perceptionthough
entirely incorrectthat women on boards were not there by
merit. A voluntary, business-led approach is the better vehicle
for long-lasting change. However, if the business community is
not able to put its own house in order and deliver sustainable
change, quotas are a legitimate final option to redress the present
gender imbalance on boards, including at European level as far
as EU law allows.
71. In the past there has been an endemic
failure to address gender inequality on boards. Since 2010, though,
following the work of Vice-President Reding in Europe and Lord
Davies of Abersoch in the United Kingdom, the issue of gender
diversity has been placed high on the political agenda, and businesses
have taken significant steps to improve the situation. We commend
these developments. We acknowledge that progress has been variable
across Europe, with some Member States moving backwards. However,
there has been a clear and encouraging improvement in the number
of female board members in the EU as a whole and particularly
in the United Kingdom. We are therefore not convinced that self-regulatory
efforts have been shown to be beyond repair. This is particularly
so when too little time has elapsed to assess fully the impact
of quotas in Member States, such as France and Italy, which have
been instituted in the intervening period.
72. So, whilst Member States are free to pursue
quotas nationally, the case has not been made for an EU-wide measure
and we urge the Commission to refrain from introducing any proposal
that would seek to institute quotas. To take legislation forward
would jeopardise self-regulatory efforts in countries, like the
United Kingdom, where business communities are strongly opposed
to quotas, and would undermine the goodwill accrued as a result
of EU leadership on the issue so far. We would also have to consider
carefully the adherence of any legislation to the principle of
subsidiarity, in the light of the extensive efforts made domestically,
and would urge the Government to oppose any such measure strongly.
73. Instead of a Directive, the Commission
should issue a non-binding Recommendation to Member States that
urges strong action to address gender diversity on boards. The
Recommendation should outline a range of recommended policy developments
and a voluntary target of 30 per cent of EU board posts being
held by women five years after it is issued. The Commission should
review progress against this Recommendation after three and then
five years. Goodwill towards self-regulation is not, and should
not be, unlimited. Should there be a clear failure to address
gender inequalities on corporate boards, the Commission should
reserve the right to legislate on the issue at either stage. This
would put the Commission in a stronger position in future negotiations
and would allow Member States to demonstrate the effectiveness
of other options.
79 The Committee has not taken evidence of the compliance
of the quota systems of other States with the limitation laid
down by the Court of Justice. Back
Q2 (Jonathan Rees, GEO) Back
Q13 (Jonathan Rees, GEO) Back
Q242 (France Henry-Labordère) Back
Small publicly traded is defined as a company with fewer than
50 per cent of shares available for trading or meeting at least
two of the following criteria: fewer than 250 employees; less
than or equal to 43 million in assets; or less than or equal
to 50 million in annual net turnover) Back
Supporters of Heather Jackson (Natalie Sadler, Karen Husband,
Karen Haslam, Alison Brookes, Jo Griffiths, Lorraine Warwick,
Jo Humphries), Aviva, NHO Back
There were disagreements over this figure. The 30% Club insisted
that only 2 per cent of CEOs were female. This was contradicted
by Arni Hole, who stressed that the figure was 7.8 per cent. The
higher figure has been chosen as it is able to present the same
argument without entering into a debate on the available statistics. Back
Supporters of Heather Jackson (Helen Mead; Cate Pye; Jo Griffiths),
30% Club, IMA, Brook Graham, PWC, An Inspirational Journey, GC100,
The Mentoring Foundation, Aviva, ABI, ELA, Spencer Stuart, CBI,
Marina Yannakoudakis MEP, Q125 (Joanne Segars, NAPF), Q153 (Simon
Walker, IoD) Back
See 30% Club, NAPF, Campaign for Merit in Business, Aviva. Research
cited is Ahern and Dittmar, The Changing of the
Boards: The Impact on Firm Valuation of Mandated Female Board
Representation, 2011 Back
30% Club, IMA, The Mentoring Foundation, ABI, ELA, CBI, Q170 and
190 (Will Dawkins, Spencer Stuart), Q259 (Helena Morrissey, 30%
NHO, European Commission. Though see Elin Hurvenes, who noted
anecdotally that the business world had taken quotas "in
their stride". Back
30% Club, IMA, The Mentoring Foundation, ABI, ELA, CBI, Q170 and
Q190 (Will Dawkins, Spencer Stuart), Q259 (Helena Morrissey, 30%
European Commission Back
Elin Hurvenes. See also European Commission Back
Dr Barnali Choudhury Back
IDDAS, ABI, NEST, Aberdeen Asset Management, ELA, Spencer Stuart,
Q23 (Caroline Normand, BIS), Q133 (Liz Murrall, IMA), Q204 (Dr
Ruth Sealy), Q243 (Arni Hole, Norwegian government), Q260 (Helena
Morrissey, 30% Club) Back
Q178 (Michael Reyner) Back
Q260 (Helena Morrissey, 30% Club). See also NAPF, Supporters of
Heather Jackson (Mags Easton, Cate Pye, Sara Ensor, Rachel Parkman),
IMA, PWC, An Inspirational Journey, ILM, GC100, Aviva, CBI, Marina
Yannakoudakis MEP, NHO, Q116 (Liz Murrall, IMA; Joanne Segars,
NAPF), Q160 (Simon Walker, IoD), Q254 (Helena Morrissey, 30% Club) Back
30% Club Back
Lord Davies of Abersoch, Women on boards, March 2012, op.
cit. See also IMA PWC, CBI Back
Cranfield University School of Management International Centre
for Women Leaders, The Female FTSE Board Report 2012: Milestone
or Millstone, op. cit. Back
Professional Boards Forum, BoardWatch, The rate of new appointments
to FTSE 100 and 250 companies, op. cit. Back
30% Club, IMA, PWC, An Inspirational Journey, The Mentoring Foundation,
Aviva, ABI, Aberdeen Asset Management, ELA, Spencer Stuart, NEST,
QCA, Marina Yannakoudakis MEP, Q132 (Liz Murrall, IMA; Joanne
Segars, NAPF; Otto Thoresen, ABI), Q150 (Neil Carberry, CBI) Back
NAPF. See also EHRC Back
Q252 (Helena Morrissey) Back
Mary Honeyball MEP Back
Fawcett Society Back
30% Club, IMA, An Inspirational Journey, ILM, ELA Back
Professor Sylvia Walby, TUC, EWL, Arlene McCarthy MEP, Fawcett
See also Austrian Federal Chancellery Back
Q228 (France Henry-Labordère, French government) Back
Elin Hurvenes Back
European Commission Back
Q275 (Sonja Lokar) Back
TUC, EWL, NAWO, Q104 (Dr Annette Lawson), Q105 (Dr Karen Jochelson,
EHRC; Scarlet Harris, TUC; Professor Sylvia Walby) Back
Professor Sylvia Walby Back
Q104 (Dr Annette Lawson) Back
Elin Hurvenes Back
Q274 (Sonja Lokar) Back
Fawcett Society, Elin Hurvenes, ELA, EWL Back
Q90 (Scarlet Harris) Back
For Box 2, see page 11. See also IDDAS, Hermes Back
European Commission, Women in economic decision-making in the
EU: progress report, op. cit. Back
European Commission Back
Brook Graham, 30% Club Back
Aberdeen Asset Management, Aviva, Spencer Stuart, Q157 (Neil Carberry,
30% Club, Brook Graham, The Mentoring Foundation, Aviva, NAWO,
CBI, Q25 (Jonathan Rees, GEO), Q206 (Dr Ruth Sealy), Q207 (Professor
Susan Vinnicombe), Q255 (Helena Morrissey, 30% Club) Back