EqUality

Civitas, 19 July 2011

Businesses throughout Europe could see the EU seize control of their recruitment policy and transform the composition of their boards, under new plans to promote gender equality. Whilst the underlying aim is undoubtedly laudable, the plans will inevitably prove controversial at state level, and risk skewing recruitment away from merit-based selection.

The scheme echoes the Norwegian model implemented in 2003, and would initially give companies a year to improve their male-to-female ratio voluntarily. If, however, by March 2012 no “credible progress” has been achieved, the European Commission will table legislation imposing a binding quota on EU businesses.

Equality and Fundamental Rights Commissioner Viviane Reding has praised the measure as confirmation that “the Commission is acting at the right time and in the right way”, arguing that companies which boast a higher than average proportion of female board members perform better both commercially and financially.

At present, women hold approximately 10% of directorships and just 3% of CEO seats in Europe’s largest listed companies. MEPs are calling for a voluntary increase to 30% by 2015 and 40% by 2020.

Yet Reding knows all too well that MEPs are unlikely to achieve this hike through non-binding means alone. As Telecoms and Media Commissioner, Reding applied the same strategy of voluntary then mandatory regulation to force phone companies to reduce their prices, but saw change only once the obligatory targets came in. Similarly, whilst the proportion of women at the top of Norway’s businesses increased just one percentage point, from 5 to 6%, under the voluntary scheme, this figure soared to 39.6% once the mandatory benchmarks were introduced.

France, Spain, Belgium, the Netherlands and Italy already have gender representation rules in place, and, if the desired figures fail to materialise next year, the Commission is likely to emulate Spanish legislation, which demands that women make up at least 40% of board membership for publicly listed companies with more than 250 employees.

However, the proposals are unlikely to receive a warm welcome in many member states, even where gender targets exist already. In Germany, for instance, women are set to occupy 20% of senior business positions by 2015, yet its plans will now be usurped by the “more ambitious” EU figures.

Anxious over undue EU interference in social policy and employment, a spokesperson for the UK Government has asserted that, while “[i]mproving gender equality on company boards is an important aim…we are against rigid quotas”. And British businesses have already marked their opposition to the plans, determined to resist EU or Government intrusion into their recruitment and promotion practices. As Richard Hyslop, EU policy spokesman for the Federation of Small Businesses, has said: “We do not support any forms of discrimination – whether negative or positive.”

Ultimately, achieving true gender equality in EU business will require more than simply the threat of obligatory targets. The latest goals may highlight the disparity between the number of women and men at the top of the career ladder, but more is needed to remove the disincentives to continue work further down the chain. Once this has been achieved, “[t]he best and most sustainable way to promote diversity in the boardroom,” as CBI Director of Company Affairs Matthew Fell has stated, “is by selecting candidates from as wide a talent pool as possible, and by making appointments based on merit”.