What steps are European companies taking to increase female and ethnic minority representation on their boards?
Many of Europe’s senior executive women are becoming decidedly restless. Why, they ask, are corporate boardrooms still mainly male preserves, even though equal opportunity has been enshrined in European law for decades now?
A 2008 study by the European Professional Women’s Network (EuropeanPWN) finds that fewer than one in 10 board members (9.7 percent) of Europe’s 300 largest companies are female, up from 8.5 percent in 2006 and 8 percent in 2004. Of a total of 5,146 board seats, women occupy a mere 501.
If Norway – Europe’s champion promoter of women in the workplace – is removed from the mix, the average growth rate for women on European boards is only 0.5 percent for each two-year period from 2004. That, says EuropeanPWN, lags well behind the rate of growth of female representation in the workforce in general.
‘Europe does not have the luxury of waiting 30 years for women to gain fuller access to decision making,’ says Annalisa Gigante, a board member of EuropeanPWN, which supports legislated quotas as a way to speed up the process. ‘Considering Europe’s economic competitiveness problems, we need to quickly find a system that will use the full range of talent available. We think quotas are the only way to do this fast.’
Many business organizations and governments oppose quotas on the basis that they fly in the face of meritocracy by giving women an unfair advantage. Germany’s ruling political party, the Christian Democrats, for example, has rejected legislated quotas for the boardroom as inherently unfair. Even supporters of quota legislation worry that it could attach a stigma to well-qualified women who are selected for board service.
For many board-level women, however, such concerns are a thing of the past. ‘Quotas create change in the shortest period of time,’ says Jella Benner-Heinacher, managing director of the German shareholders’ association DSW and a member of the supervisory boards of TUI, K+S and AS Creation. ‘If you had asked me 20 years ago, I would have told you I am opposed to quotas. But since almost nothing has happened since then in this area, I now have a different view. I think quotas are a necessary door-opener. Women tend not to have the networks to gain board appointments, and I see nothing wrong with having this door opened.’
A couple of European governments agree. First and foremost is Norway, whose company law since 2008 requires 40 percent female membership of boards of listed companies. Companies risk fines and/or forcible de-listing from the stock exchange if they do not comply.
The results have been dramatic. Female board representation in listed Norwegian companies has soared from 22 percent in 2004 and 28.8 percent in 2006 to 44.2 percent in 2008. Sweden, whose government recommends one-third female representation on boards but does not require it legally, is also a front-runner with 26.9 percent, followed by Finland (25.7 percent) and Denmark (18.1 percent).
Soft penalties
The only European country other than Norway to impose quotas by law is Spain. Its 40 percent quota is not required until 2015, however, and the penalty for non-compliance is practically nil. Companies that comply gain a higher ranking as suppliers to the government. ‘The penalty for non-compliance – not receiving that higher ranking as a supplier – is quite soft, compared with being kicked out of the stock exchange,’ Gigante notes.
Finland has also made a slight move in the direction of quotas by including language in its revised corporate governance code that encourages companies to have at least one woman on their board of directors. This is regarded as a best practice but is not a requirement; companies that do not comply need only give some sort of explanation as to their reasons.
France experimented with quota legislation three years ago, but the law was thrown out by the constitutional court. French advocates of a 30 percent quota for women have gone back and had the constitution amended, so that quota legislation can apply to female representation on private company boards, just as it does for female representation on ballots for elective office.Germany, on the other hand, is proving far more quota-resistant, despite lobbying by the Social Democrats and the Green Party. Germany’s revised corporate governance code contains a recommendation to increase diversity on boards of directors, without making any direct reference to gender diversity. ‘I think that in order for this issue to gain real traction in Germany, the best way would be for quotas to be included in an EU directive dealing with the quality of supervisory boards,’ says Benner-Heinacher.
Vive la différence
What, if anything, is likely to change for European companies if more women enter the boardroom? For one thing, the gender balance in the executive ranks below board level is likely to change, says Monika Schulz-Strelow, president of Frauen in die Aufsichtsräte, a German lobby group advocating legislated quotas for women on supervisory boards.
‘We have found that when there are women on the supervisory board, this tends to lead to increases in the number of women in senior management,’ Schulz-Strelow says. ‘The pressure has to come from the very top – the supervisory board – rather than from the bottom.’
‘As soon as women are seen as part of the brain force rather than just part of the labor force, things will move faster,’ predicts Mirella Visser, president of EuropeanPWN and a member of the supervisory board of Royal Swets & Zeitlinger.
Moreover, once women gain significant board representation, improvements can be expected in the decision-making process itself, research shows. According to EuropeanPWN, three women constitute the minimum ‘critical mass’ needed to make a difference.
When at least three qualified women – or three representatives of any other non-mainstream group – are present on a decision-making body, ‘the nature of decisions and decision making changes,’ Visser says. ‘Quite often, with all-male boards you see a kind of group-think develop, and a lot of communication is ego-driven. Women tend to pose different questions, or at least pose questions in a different way.’
