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What Europe Can Teach the US About Gender in the Boardroom

As the U.S. presidential campaign moves into its final months, newspapers are full of promises from both candidates. But there's promising news from Europe that's also worth attention.

A proposal being drafted by the European Commission and expected to be formally introduced next month by Viviane Reding, EU Commissioner for Justice, Fundamental Rights, and Citizenship, would force euro-zone companies larger than 250 employees or with more than €50 million in annual revenues to reserve at least 40% of their nonexecutive director board seats for women by 2020 or face fines and other sanctions.

This admittedly controversial step comes after nearly a decade of attempts to induce companies to voluntarily boost the number of women in boardrooms and the higher ranks of businesses. However, such self-policing has been ineffectual at best and, more often, insultingly negligible. Meanwhile, according to a recent article in The Financial Times, where a minimum threshold was adopted, there has been a marked improvement in gender balance. Norway has had a quota since 2002, and women now make up more than 40% of board members. France introduced quotas in January 2011, and in one year, the number of women on boards took a grand jeté of 10 percentage points to 22%. Italy and the Netherlands have also seen an increase since adopting quotas.

Smart organizations understand that in these tough economic times, no one can afford to curtail or shut out top talent, no matter their gender or ethnicity. A McKinsey study found that across all industry sectors, companies with the most women on their boards of directors significantly and consistently outperform those with no female representation: by 41% in terms of return on equity and by 56% in terms of operating results. In other words, diversity — especially gender diversity — unlocks growth.

Many companies are already putting admirable efforts and resources into strengthening a diverse pipeline of women and minorities. But there are plenty of others determined to circle the wagons around their pale, male executive pool.

Government can — and should — help bridge the breach. In fact, promising examples are already being implemented in the UK. Prime Minister David Cameron has made gender balance in the boardroom a personal mission, using the bully pulpit of office to push for a voluntary code of conduct for executive search firms and succession planning within companies. As a result, the percentage of women on UK corporate boards has increased from 12.5% to 17.3% since 2010.

Recognizing that what matters gets measured and what gets measured gets done, the "Think, Act, Report" initiative encourages UK organizations larger than 150 employees to make public data on how women are doing. Tesco, Unilever, BT, Eversheds, and the National Grid are all on board.

Other ways in which government can make its mark: Create tax incentives for firms that have substantial numbers — say, a quarter to a third — of women and minorities in their executive ranks. Set up a talent bank and clearinghouse for women and men who want to "on-ramp" their careers after voluntarily off-ramping for childcare, eldercare, or other personal obligations.

We can play an important part, too, on this side of the Atlantic by encouraging our elected officials — and our would-be elected officials — to take notice. Both presidential candidates portray the U.S. as a land of opportunity and innovation. But when the leadership of teams is homogenous — read: dominated by white males — the risk of trouble soars. Lack of gender diversity in a company's management team, a recent Financial Times editorial emphasized, "sends negative signals of a conservative mind-set, an inability to look beyond a tried circle of directors and a proneness to damaging group-think."

As we look ahead to the next four years — and beyond — it's important to see that diverse representation at the top is key to unlocking innovation and growth in our companies. When a critical mass of women is present in the executive suite and the boardroom, positive things can happen. Now that's something worth voting for.

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