Marina Yannakoudakis is a Member of the European Parliament for London.
European Commission Vice-President Viviane Reding is now famous in Britain for her criticism of David Cameron’s immigration policy and her recent call for a United States of Europe.
However, as a third-term European Commissioner, the bouffanted Luxembourger has long courted controversy with her plans for EU interference in football player transfer fees, mobile phone roaming charges, and Member States’ policies on Roma. Her latest Sisyphean task has set her in opposition to Conservative MEPs as she tries to introduce a compulsory 40% quota of women non-executive members on boards by 2020.
Reding’s plans were adopted by the European Parliament at the end of last year. The proposals were so radical that even Labour MEPs were forced to abstain, in spite of their support for a gender quota imposed at the EU level. I and my fellow Conservative MEPs were the most effective opponents of the legislation and it is hoped that David Cameron together with member state allies can block the plans at the level of the European Council.
In the meantime, I have written a report for the Bow Group outlining why an EU quota for women on boards is not merely another unwelcome intervention by Brussels into the UK’s employment policy, but is also a move which will adversely impact the future of women in business while failing to realise the objectives it set out to achieve.
It could also come at a cost of between £60.58 billion and £81.55 billion in terms of lost market-cap for listed UK companies, based on a study of the experience in Norway, as well as seeing firms choosing to delist.
Reding’s proposals are modelled on a similar gender quota introduced in Norway in 2006. The lessons learned from Norway’s quota experiment clearly show that quotas are little more than a “quick fix” which do not address the underlying issue of encouraging and supporting women at all levels of business, including the executive level.
While 42% of board members in Norway are now women, only 3 per cent of CEOs are female, 13 per cent of CFOs and 15 per cent of executive team members. Meanwhile, fellow Nordic countries Finland and Sweden have more CEOs and executives than Norway in spite (or perhaps because) of both countries opting for the voluntary approach.
In Norway we also saw around 100 companies simply de-list in order to avoid the new law (which only applied to listed companies). This is bad for corporate transparency, given that public limited companies have a number of disclosure requirements to shareholders whereas non-listed companies only have to adhere to minimum disclosure standards.
And those companies which did not delist found themselves needing to quickly find women for their boards. Or, in the case of many, one woman: Mimi Berdal. Berdal fast became Norway’s most sought-after female director. The most golden of the so-called “golden skirts” or “trophy directors” – the women who sat on the boards of multiple companies in the scramble to make up the numbers – she was once on the boards of 90 separate companies.
By parachuting women into non-executive positions, Norway didn’t change the gender balance at the executive level. There is no shortage of qualified women, so we need to address the real barriers to women taking up senior positions in business. Here, we need a bottom-up rather than a top-down approach and this is why I support the voluntary methods being used in the UK to improve the pipeline of board-ready women.
In the UK, organisations such as the 30% Club work with companies, especially Chairmen, to encourage boardroom diversity. Groups such as these must work hand-in-hand with improving the pipeline below board level and to widen the talent pool available to business.
Mentoring is important in this respect. We need a community of female directors to foster the development of high potential women. It has been widely observed that women remain a lot less confident and a lot more self-critical than men, especially when applying for jobs. Mentors can help boost women’s confidence and encourage them to apply for the top posts.
We need greater diversity at all levels of business. There is some evidence to suggest that greater diversity has certain economic benefits and we need to support a talented pool of women at all levels of business which will lead to a stronger companies.
EU quotas will not address the cause of the problem, however.
Vice President Reding should be focusing on ensuring that there is a clear pathway for more women in boards and increasing participation by women at all levels of work, rather than seeking a quick fix. We must resist this attempt to make the composition of privately run business’s boardrooms a European Union competence.
Ultimately the question of under-representation of women on boards needs to be a matter for sovereign states. If member states truly wish to increase women’s participation on boards, they need an approach that is flexible and appropriate in the cultural patchwork of European countries.