Watering down women on boards quota is not the way to go

by Fiona Hotston Moore

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07 Dec 2012

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Ripples in water

THE EUROPEAN COMMISSION recently approved proposals from justice commissioner Viviane Reding to have women in at least 40% of board positions by 2020. Unfortunately, following fierce opposition from a number of member states, including the UK, the proposals have been watered down and will not address the unconscious and political bias which blocks the progress of a pool of talented and aspiring senior women executives.

The proposals approved by the European Commission will require member states to put in place measures designed to ensure women hold 40% of non-executive board positions by 2020. These apply only to large listed companies and the proposal is for a common objective, rather than prescriptive regulations and sanctions.

In my view, this is an opportunity missed to address the discrimination inherent in our boards and the appointments process by implementing temporary compulsory gender quotas. Self-regulation has not worked and the current proposals allow member states and their large corporates to continue to pay lip service to the proven business case for diversity on boards.

Since the Davies Report (which proposed the board quotas) was issued in February last year, we have indeed seen an increase in women in non-executive roles, up from 15% to 22% in the FTSE 250. But in executive roles, the gender balance has barely moved from 5%. With the recent resignations of Pearson boss Dame Marjorie Scardino and Cynthia Carroll from Angle America, we are left with just two women holding the top job in the FTSE 100.

The fortunate few women who have made it to the pinnacle often argue against quotas because they encourage tokenism. But in fact, quotas correct existing discrimination. Quotas are the most effective tool to challenge inertia and to force the break-up of elite "clubs".

The head of a large executive board search agency admitted to me recently that he only put one woman forward out of hundreds of applicants for a post, and seemed proud of the fact. Are we seriously supposed to believe that the rest were all deluded or hopelessly unqualified?

Norway imposed quotas in 2006 and now all companies have one woman on the board and over 80% have more than three women.

I do not accept that we don't have a pool of suitable candidates. I meet a lot of very talented women who are ready for board positions and frustrated by the attitudes of chairs and board search agencies who refuse to take them seriously.

Diverse boards have been shown to increase shareholder value and to reduce corporate risk. Diverse boards have better understanding of their teams, customers and local business culture. They are more creative and less likely to follow group think. I have not heard anyone suggesting we should not be pushing for diversity on boards, but the question is how we challenge the status quo.

Whilst I am disappointed by the watering down of the EU proposals, I am delighted by the amount of debate the topic of quotas has generated and I hope this means both governments and large corporates are finally starting to engage in the discussion.

I hope that by the time my daughter joins the workforce in 2020 we will finally appoint board members based on merit, rather than gender, school or background.

Fiona Hotston Moore is a partner at Reeves

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