EU Weighs Quotas as Firms Fail to Add Female Board Members

European Union’s Justice Chief Viviane Reding
European Union’s Justice Chief Viviane Reding. Photographer: Georges Gobet/AFP/Getty Images

The European Union’s justice chief Viviane Reding is weighing possible quotas to promote more women to board level after companies made “limited progress” on redressing the gender imbalance.

Some 13.7 percent of board seats in the EU belong to women after a 1.9 percentage point increase between October 2010 and January 2012, the European Commission said in a report today. Reding last year asked businesses to appoint more women to company boards. LVMH Moet Hennessy Louis Vuitton SA is among only 24 companies that signed Reding’s pledge to increase female board members to 30 percent by 2015 and 40 percent by 2020.

“I am not a great fan of quotas,” Reding said in a statement. “However, I like the results they bring.” She said that the lack of women “in top jobs in the business world harms Europe’s competitiveness and hampers economic growth.”

The commission will now consider “possible action at EU level, including legislative measures,” Reding said. She’s asking businesses and other groups to comment on what kind of measures the EU should take to tackle the lack of gender diversity in boardrooms. Such consultations typically precede the drafting of legislation by the Brussels-based commission.

Spain has a target for 40 percent of female representation on large company boards by 2015, and France passed a law last year to impose a 20 percent quota by 2014 and 40 percent by 2017 for companies with at least 500 employees and annual sales of 50 million euros ($66 million). Norway, which is not part of the EU, in 2003 set a quota for at least 40 percent of corporate board seats to be filled by women.

‘Patronizing’ Quotas

“Quotas actually undermine the principle of equality and are patronizing to women,” said Helena Morrissey, the chief executive officer of Newton Investment Management, who founded the 30 Percent Club to press companies to voluntarily employ that many female directors.

“Even those countries with quotas are still struggling with genuine equality and there’s evidence that shareholder value can be destroyed if quotas are imposed,” Morrissey said in an e-mailed statement. “Directors need to be there on merit.”

European companies don’t see “clear evidence of the direct effect of quotas in raising the number of women at every level of responsibility,” said the BusinessEurope employers’ federation in a statement. “Quotas interfere with private ownership and shareholders’ rights to make decisions.”

U.K. Threat

British companies may face quotas unless they promote more women to board level, U.K. Prime Minister David Cameron said last month, arguing that businesses are “failing” the economy by not having enough females in senior positions.

U.S. companies are lagging gains in some European countries where female board membership is expanding to meet regulatory mandates and corporate governance codes. Representation of women on boards of Standard & Poor’s 500 companies declined to 16 percent in 2011 from 16.6 percent in 2010, according to the Bloomberg Rankings annual analysis last year, which gathered data from public company information.

In Norway, 37.9 percent of directors at the country’s largest companies are women. They represent 11.7 percent of directors among 4,875 board seats at 334 of the biggest European companies, an increase of 21 percent since 2008, according to an October 2010 study from the European Professional Women’s Network conducted with Russell Reynolds Associates, a headhunting company.

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