Questions and Answers: Proposal on increasing Gender Equality in the Boardrooms of Listed Companies
European Commission
Brussels, 14 November 2012
Questions and Answers: Proposal on increasing Gender Equality in the Boardrooms of Listed Companies
Why do we need legislation to improve the gender balance on the boards of listed companies?
At present,
91.1% of executive board members, 85% of non-executive board members and
96.8% of the boardroom chairs are men, while women make up 8.9%, 15%
and 3.2% respectively. This is despite
suggested evidence of the benefits of gender diversity for company
performance (see separate fact sheet with economic arguments). A wide
range of voluntary initiatives at national and European level have so
far failed to improve the situation.
The European
Commission has therefore adopted a proposal for legislation (a
Directive). The aim of the proposal is to substantially increase the
presence of the under-represented sex on corporate boards throughout the
EU by setting a minimum objective of 40% by 2020 for members of the under-represented sex for non-executive members
of the board. The proposal obliges listed companies with a lower
percentage (than 40%) of the under-represented sex among non-executive
directors to make appointments to those positions on the basis of a
comparative analysis of the qualifications of each candidate, by
applying pre-established, clear, neutrally formulated and unambiguous
criteria, in order to meet the 40% objective.
Why do we need legislation at European level? Is this not something to be left to the Member States?
Due to the slow
progress of self-regulatory initiatives, several EU Member States have
already started to act and have introduced legally binding laws for
company boards. 11 EU Member States
(Belgium, France, Italy, the Netherlands, Spain, Portugal, Denmark,
Finland, Greece, Austria and Slovenia) as well as the European Economic
Area Member State Norway have introduced legal instruments to promote
gender equality on company boards. In eight of the EU countries the instruments cover public undertakings (Austria, Belgium, Denmark, Finland, Greece, Italy, Portugal and Slovenia). Meanwhile,
in two thirds of the Member States , no legal measures were introduced
and no significant progress has been made in recent years (see also
separate fact sheet on the situation in the different Member States).
This piecemeal approach can create
practical problems for the internal market, as different company laws
and sanctions for not complying with different quotas, could lead to
complications, in particular for multinational companies. Legal
uncertainty can have a deterrent effect on companies' cross-border
investments and on the establishment of subsidiaries in other Member
States.
The current legally fragmented approach
risks hampering the functioning of Europe's Single Market – this is why
we need to act at European level, to ensure we create an EU-wide
framework for these positive action rules.
What is the current situation for women on boards in the different Member States?
On average, a
mere 13.7% of board members of the largest companies listed on stock
exchanges in the 27 Member States are women. This breaks down into 15% for the non-executive posts and 8.9% for the executive posts on the boards (see also separate fact sheet on the figures in the different Member States).
Women are barely visible among top business leaders – more than 96 out
of 100 company presidents are men. And the differences between Member
States are enormous – in Malta, 3% of board members are women, while
Finland has 27% women on the boards of the largest companies listed on
the stock exchange.
Progress over the past ten years has been slow:
an incremental average increase of the number of women on boards of
just 0.6 percentage points per year has been recorded since 2003.
Progress in individual countries varies as well. In some countries the
share of women has even fallen. At such a pace, it would take around 40
more years to approach a situation of real gender balance (that is
around 40%).
France is the motor of change:
the proportion of women on the boards of French companies (on the CAC
40 index) increased by 10 percentage points to 22.3% in January 2012, up
from 12.3% in October 2010. This change, prompted by the binding quota
adopted in 2010, makes up more than 40% of the total EU-wide change
recorded between October 2010 and January 2012. France's quota is 40% by
2017 with an intermediate target of 20% by 2014.
What is the legal basis for this proposal?
The EU's competence to legislate in gender equality matters dates back to 1957 (see SPEECH/12/702). The EU's right to act in issues of gender equality in employment and occupation follows from Article 157(3) TFEU.
This provision is the specific legal basis for any binding measures
aiming at ensuring the application of the principle of equal
opportunities and equal treatment of men and women in matters of
employment and occupation, including so-called positive action providing for specific advantages in favour of the under-represented sex.
How many companies will be affected?
The measures
will only affect companies listed on stock exchanges in the EU's Member
States. It will not apply to small and medium-sized enterprises
(companies with less than 250 employees and an annual worldwide turnover
not exceeding 50 million EUR) and non-listed companies. This means an estimated 5 000 companies in the whole of the EU will be affected.
Why does the proposal only apply to non-executive board members?
The proposal's
objective of 40% only applies to non-executive directors who – while
being important actors in particular in relation to corporate governance
– are not involved in the day-to-day running of a company. This is so
as not to interfere with the freedom to conduct a business and property
rights – two fundamental rights guaranteed by the EU's Charter of
Fundamental Rights.
The proposal also includes, as a complementary measure a 'flexi-quota',
an obligation for listed companies to set themselves individual,
self-regulatory targets regarding the representation of both sexes among
executive board directors to be achieved by 2020 (or 2018 in case of
public undertakings). Companies will have to report annually on the
progress made.
Why does the proposal place a special emphasis on public undertakings?
The proposal
places a special focus on public undertakings because Member States
exercise a dominant influence over these (by virtue of their ownership
or their financial participation therein) and have therefore more
instruments to bring about change more rapidly. Public undertakings will
have two years less time (until 2018) to meet the 40% objective set out
in today's proposal. Examples of public undertakings likely to be
affected by the proposal include EDF (France), Belgacom (Belgium),
TeliaSonera (Sweden, Finland, Norway), Transelectrica (Romania) and
Österreichische Post AG (Austria). The
definition of public undertakings is set out in Commission Directive
2006/111/EC on the transparency of financial relations between Member
States and public undertakings as well as on financial transparency
within certain undertakings.
"Public undertakings" means any
undertaking over which public authorities may exercise directly or
indirectly a dominant influence by virtue of their ownership of it (for
example controlling the majority of the votes attached to shares issued
by undertakings or appointing half of the members of the undertaking's
administrative, managerial or supervisory body), their financial
participation therein (for example holding a major part of the
underrtaking's subscribed capital), or the rules which govern it.
Why does the proposal only set an objective of 40% and not full parity?
The proposed objective of 40% for the
minimum share of both sexes among non-executive board members strikes
the right balance: it is situated between the minimum of the 'critical
mass' of 30% found to be necessary for gender diversity to have a
sustainable impact on board performance and full gender parity (50%).
Why does the proposal harmonise requirements relating to board appointment decisions?
The proposal requires only such changes to national company law that are strictly necessary for the minimum harmonisation of requirements for the appointment decisions and it respects the different board structures across Member States.
Member States
that already have an effective system in place will be able to keep it
provided it is equally efficient as the proposed system in
attaining the objective of a presence of 40% of the under-represented
sex among non-executive directors by 2020. And Member States remain free
to introduce measures that go beyond the proposed system. Inbuilt safeguards
will make sure that there is no unconditional, automatic promotion of
the under-represented sex. In line with the Court of Justice of the
European Union's case law on positive action, preference shall be given
to the equally qualified under-represented sex - unless an objective
assessment taking into account all criteria specific to the individual
candidates tilts the balance in favour of the candidate of the other sex
Why is gender equality good for the economy?
Getting
more women into the labour market can be an important factor in
improving Europe's competitiveness. Having more women in the workforce
will help achieve the EU's goal of raising the employment rate for
adults to 75% – a target to which all EU Member States have signed up to
in the context of the Europe 2020 strategy, the EU's economic growth
strategy.
A growing number of studies suggest there
may be a link between gender balanced boards and financial performance.
Studies from various countries show that companies with a higher share
of women at top levels deliver strong organisational and financial
performance.
For instance, in a study carried out by Catalyst1,
companies with more women on their boards were found to outperform
their rivals with a 42% higher return in sales, 66% higher return on
invested capital and 53 % higher return on equity. The World Bank also
finds that eliminating discrimination against female workers and
managers could significantly increase productivity per worker by 25 to
40%.
60% of university graduates are female.
Drawing on women's professional skills for leadership positions is
likely to become all the more necessary as ageing populations and skills
shortages put an increased brake on economic growth. Ageing European
societies have to make full use of their talent if they are to
successfully compete in a globalised world.
What has already been done at EU level to promote gender equality on company boards?
In 1984, the Council adopted a recommendation on the promotion of positive action for women (84/635/EEC).
In 1996, the
Council adopted a recommendation, upon proposal by the Commission, on
the balanced participation of women and men in the decision-making
process (96/694/EC).
In 2010, the Commission identified 'equality in decision making' as one of the priorities of the Women's Charter (COM(2010)0078) and of its Strategy for Equality between Women and Men 2010-2015 (COM(2010) 491).
In 2011, Vice-President Viviane Reding launched the 'Women on the Board Pledge for Europe'
calling for publicly listed companies in Europe to voluntarily commit
to increasing women's presence on their boards to 30% by 2015 and 40% by
2020. A year later, only 24 companies had signed the pledge.
In March 2012, the Commission took stock of the situation
and found only an average improvement of just 0.6 percentage points
over the past years. At this slow rate of progress it would take around
40 years before companies would naturally reach gender balanced
representation in boards.
The European Parliament called for legislation in its resolutions of 6 July 2011 and 13 March 2012 on equality between women and men in business leadership in the European Union.
Between 5 March and 28 May 2012, the Commission held a public consultation
inviting the public – individual businesses, social partners,
interested NGOs and citizens – to comment on what kind of measures the
EU should take to tackle the lack of gender diversity in boardrooms. The
results have fed into the proposal presented by the European Commission
today.
What are the next steps for this proposal?
The Commission's proposal will now pass
to the European Parliament and Council of the European Union
(representing Member States' national governments) for consideration
under the normal legislative procedure (also known as 'co-decision
procedure' between the two institutions who decide on an equal footing,
with the Council voting by qualified majority and the European
Parliament voting by simple majority).
What about women in senior positions in the EU institutions?
European Commission
In the Commission as a whole women make up 52.4% of staff, men account for 47.6%.
Thanks to
President Barroso's insistence on having female candidates for the
College of Commissioners in 2009, 1 in 3 (33%) of the European Commissioners
are today women. This is the best gender balance yet – up from 5.6% in
1994/1995. It also compares favourably with the situation in national
governments of EU Member States, where an average of 1 in 4 (26%) of
senior ministers are women.
In December
2010, the Commission adopted a Strategy on Equal Opportunities for Women
and Men within the Commission (2010-2014), setting targets for gender
balance in senior management as well as in other posts (middle
management and non-management policy level).
By 1 October 2012, the percentage of
women in management positions had increased to the extent that the
Commission has met or is on course to meet all three targets for 2012.
It has been so successful in recruiting women in top jobs that on 1
October 2012 it had already reached 27.2% women in senior management,
exceeding its target of 25% for 2014 (see also separate fact sheet on
gender equality in the European Commission).
European Parliament
In the European Parliament,
women make up 35% of members of the European Parliament (MEPs),
compared to 65% who are men. This compares favourably with the situation
in national parliaments in the Member States, where an average of 26%
of members of lower houses and 23% of those in upper houses are female.
European Council
The European Council, representing heads of state and government of the EU Member States, is made up of 11% women, or 3 out of the 27 members.
European Central Bank
The Governing Council of the European Central Bank,
the ECB's main decision-making body, currently includes no women. All
22 members are men, while one position is vacant. The institution in
charge of these appointments is the European Council. In national
central banks, all Governors are also men.
Are there actually enough qualified female candidates for board positions?
In September 2011, European Business Schools and Senior Executive Women launched a call to action
to shatter the glass ceilings which impede senior women executives from
acceding to corporate boardroom seats throughout Europe. Their ever
growing list of "Board Ready Women"
– up to 7 500 today from 3 500 in March 2012 – makes it clear that
there are more than enough eminently qualified women to help lead
Europe’s and the world’s corporations into the 21st
century. All of these women fulfil stringent criteria for corporate
governance as defined by publicly-listed companies, are well qualified
and ready to go on the boards as of tomorrow. The pool of talent is
there – companies should now make use of it.
How does the proposal take into account the principles of subsidiarity and proportionality?
The lack of sufficient and sustainable
progress in achieving gender balance on boards is a challenge common to
all EU Member States. The impact of existing barriers across the EU can
only be reduced through a common approach, and the potential for
boosting competitiveness and growth can be better achieved through
coordinated action at EU level rather than a patchwork of national
initiatives of varying scope, ambition and effectiveness.
Scattered and divergent regulation
at national level is bound to create practical problems in the EU's
internal market, as different company law rules for not complying with a
binding quota could lead to complications in business life and have a
deterrent effect on companies' cross-border investments.
At the same
time, EU action is only necessary as long as the problem persists and
needs to be proportionate to its objectives. That is why the directive
is a temporary measure, which will automatically expire once the objectives are attained.
The proposal
will only apply to publicly listed companies, due to their economic
importance and high visibility. It will not apply to small and medium enterprises (companies with less than 250 employees and an annual turnover not exceeding EUR 50 million).
The proposal is based on a minimum harmonisation approach and is limited to setting common objectives and general rules,
thereby giving Member States sufficient freedom to determine how these
should be best achieved at national level, taking into account national,
regional or local circumstances including national company law and
company board recruitment practices. Sanctions must be effective,
proportionate and dissuasive, though Member States have been granted
discretion to specify the sanctions, in line with their individual
company law systems.
The proposal
does not require undue changes to national company law and respects the
different board structures across Member States. Its 40% objective focuses on the non-executive director posts
of company boards in order not to interfere with the freedom to conduct
a business and property rights – two fundamental rights guaranteed by
the EU's Charter of Fundamental Rights.
The proposal also provides for a possibility of justifying non-compliance with the objective where the members of the under-represented sex represent less than 10 per cent of the workforce.
Annex 1
Percentage (%) women on boards
Women on the boards of the largest listed companies: executive and non-executive members (January 2012)
Source: European Commission's Database on women and men in decision-making
Note: In
a one-tier system data on non-executives refer to non-executive members
of the board and data on executives refer to executive members of the
board. In a two-tier system data on non-executives refer to members of
the supervisory board and data on executives to members of the
executive/management board. Occasionally, it is possible for the
supervisory board to include one or more executive members (e.g. CEO and
CFO). In this case these are included in the executive figures, though
individuals participating in both boards are counted only once.
Non-executive figures in this case still refer to the total members of
the supervisory board and could, therefore, include some executives but
the numbers concerned are not significant and should not affect the
final result.
Share of Women
among Members on Boards for Listed Companies in EU Member States and
some other countries (Iceland, Norway, Australia, Canada and the US)2
Source: European Commission. Database: women & men in decision making, [Online] Available from: http://ec.europa.eu/justice/gender-equality/gender-decision-making/database/business-finance/quoted-companies/index_en.htm and Catalyst, Women on Boards, Quick takes, [Online] Available from: http://www.catalyst.org/publication/433/women-on-boards
Notes: data on
European countries refer to members of the board of directors
(supervisory board in case of separated supervisory and executive
functions. Count includes the chairperson). Data on countries outside
Europe derive from different sources with different coverage and
reference years
Change in the share of women on corporate boards between October 2010 and January 2012
Source: European Commission, Database on women and men in decision making
Men and Women presidents/chairpersons of large companies, EU-27
Annex 2
Gender Equality in the European Commission
European Commission
|
Current rate (%women)
|
Target 2012 (%women)
|
Target 2014 (%women)
|
Senior management
|
27.2%
|
24.8%
|
25%
|
Middle management
|
28.7%
|
27.7%
|
30%
|
AD non-management
|
42.4%
|
42.7%
|
43%
|
1
:
Catalyst Inc., 'The Bottom Line: Corporate Performance and Women's Representation on Boards', 2007
The EC database does not
report figures for Australia, Canada and the US. Catalyst instead
reports figures only for some EU countries and Anglo-Saxon countries.
Since the EU figures reported by Catalyst are in line with those
reported by the EC database figures, we believe that the two databases
are comparable.
Δεν υπάρχουν σχόλια:
Δημοσίευση σχολίου