EU May Soon Require More Women On Company Boards
2:00 pm, March 5th | by Amy Tennery
Viviane Reding, the European Commissioner for Justice, Fundamental Rights and Citizenship, announced today that she’s pursuing a new quota system that would require companies across the EU to put more women on their boards. Needless to say, this is a very big deal.
Frustrated by the slow rate of women’s advancement in business, Reding noted that would take another four decades before women would account for 40 percent of boardroom spots in the EU, according to the AP.
When would this quota system go into place? Why is this important? Do people actually want the EU to require companies to include more women on their boards?
Here’s everything you need to know about the possible EU-wide quota.
What would Reding’s plan do? It would, hypothetically, impose a mandatory level for women on company boards across the European Union. That level will be determined after “a three-month public consultation,” according to the FT, to gauge opinion and collect proposals.
So nothing’s happening right away? Nope. Reding’s announcement was just the first move toward imposing an EU-wide mandate.
But why is she doing this mandatory thing? Can’t she just issue a statement encouraging more companies to do this? Because, according to Reding, she’s had it up to her elbows asking people nicely. During a statement on the proposed legislation, Reding explained her motives (according to the AP): “One year ago, I asked companies to voluntarily increase women’s presence on corporate boards. However, I regret to see that despite our calls, self-regulation so far has not brought about satisfactory results.”
Are there really that few women on boards over there? It can’t be as bad as she’s making it sound. In a word, yea. Overall, the percentage of female board members across the EU isn’t much worse than in the U.S. Commission figures peg that figure at around 13.7 percent, while a Forbes guide puts the percentage in the U.S. around 15. That being said, the EU countries that do have low levels of female participation on company boards have really, really low levels. In Cyprus, just 4 percent of board directors are female, according to CNBC. In Malta, just 3 percent are female. Italy and Portugal have around 6 percent.
But why should I care about the number of women on company boards, aside from empowerment or whatever? As CNBC also pointed out, the EU countries with the lowest level of female boardroom participation are also the worst performing. (Whether that’s correlation or causation, of course, remains to be seen.) Still not convinced? How about this: Studies show that women business leaders are more benevolent, more cautious with their money, and are less likely to take big risks. As Georgina Marshall, a regional head at Aviva Investors put it, “macho culture” often contributes to greater risk taking — especially in the financial sector. Oh, and numerous studies show that companies with greater gender diversity in their executive ranks tend to make more money. Women: We’re Good To Have Around.
Okay, so having diverse company boards is a good thing. But what are the downsides of implementing a quota system? Won’t that make people a little testy? Yep — and it already has. And even Reding said she’s “not a fan of quotas,” as general practice, according to Spiegel, so it’s not like she doesn’t recognize it’s a controversial move. In fact, gender quotas have a sizable share of female opponents. London conservative MEP Marina Yannakoudakis said she’s was concerned the quota system will create “trophy directors.” Helena Morrisey, founder of the 30 Percent Club and an advocate for women in business, said that quotas are “patronizing to women.”
But quotas have worked out for somebody… right? Yes! Norway has implemented its own “40 percent rule” for women on boards — and it has been largely successful, despite some initial griping. So, quotas, for some, can work. But, as FT found, many of the plan’s detractors are concerned that the broadness of a Europe-wide quota could lead to problems. Just because it worked out for one country doesn’t mean it’ll work out for all the countries.
So what’s next? Reding will solicit proposals from the public. The pitches must be applicable to all of the EU and account for some kind of legal mandate, according to Spiegel. If all goes according to plan, you can expect to see some of those proposals by this Summer.
(Image of Viviane Reding via Wikimedia.)