Are Quotas the Answer in the EU and UK?

By Cleo Thompson (London), Founder of TheGenderBlog

Three years ago, Professor Lynda Gratton of the London Business School used the phrase the “leaking pipeline,” when she declared:

“… across most industrial sectors, while 50 per cent of graduates recruited are women, only 30 per cent of managers are women and about 15 per cent of senior executives are women. Clearly, there is a leak in the pipeline that filters out many women en route to the corporate suite. Many reasons for this leak have been explored. Women fail to see role models at the top and leave to find a better working situation or create one of their own. They might also leave because they feel forced to choose between work and home. Only 48 per cent of female team leaders we surveyed have children, while 96 per cent of their male colleagues are fathers. A worrying trend is that more women are leaving. Without swift action, the 50:30:15 ratios will continue to be a drain on talent and a negative pull on performance.”

As the global economy slowly emerges into a brave new post-credit crunch world, statistics from Catalyst, McKinsey, the University of Cranfield and others indicate that the last three years have seen little change for women in business, and there is certainly still no evidence that the leaking pipeline will fix itself – so has the time now come for more direct action?

Time for Quotas in the EU?

Viviane Reading, who heads up equality and equal rights in her role as the European Union’s Fundamental Rights’ Commissioner, seems to think so. She has warned that, unless more board room seats are filled by women by the end of 2011, she will use new powers under the Lisbon Treaty to impose gender quotas at the European level, meaning that privately owned British companies (and others from countries which fall under EU legislation) would be required to more than double women’s representation from the current 1 in 10 number of seats now occupied by female board members.

Quoted in the Daily Telegraph, the Commissioner hopes that her ultimatum will change both the European business culture and the gender mix and has suggested that she does not “… rule out the possibility of legislation in this area.”

Is 40% the magic number?

Similar legislation already exists elsewhere in Europe, most noticeably in Spain and Norway, who have both passed laws in recent years which require companies to apply a minimum 40% boardroom quota for women; additionally, the BBC reported in March 2010 that France, Italy and the Netherlands are considering similar measures. In the same article, Europe’s largest telecoms firm, Deutsche Telekom was highlighted as a rare example of an organisation which has voluntarily introduced its own quota system to make sure that 30% of its upper and middle management positions are held by women by 2015 – the first major German firm to do so.

“Having a greater number of women at the top will quite simply enable us to operate better,” said the firm’s chief executive, René Obermann.

At present, only 13% of DT’s top positions are held by women, while 60% of Germany’s business graduates are female.

Elsewhere, the Australian Securities Exchange (ASX) announced in December 2009 that it was giving Australia’s top listed companies mandated diversity regulations, effective January 2011, as a last chance opportunity to shape up, prior to the threatened introduction of tougher sanctions such as quotas.

Might this softly-softly approach be a better angle for EU based companies? The Australian model is based around audits, disclosure and policies and will require listed companies to:

• Establish a “diversity policy” that includes measurable objectives relating to gender diversity as set by the board;
• Disclose in their annual report the measurable objectives for achieving gender diversity as set by the board in accordance with the diversity policy, and –
• Disclose in the annual report the proportion of women employees in the whole organisation, in senior executive positions and on the board.

It will be interesting to see what impact shining this torch will have on the shape of Australian companies, in a country where women currently occupy only 8% of board seats.

Resistance and reaction

Meanwhile, Ms Reading’s proposals have been met with opposition from British business organisations, who have already stated that they are ready to oppose the quotas and any EU or government interference in either recruitment or promotion. The UK’s coalition government has stated that: “improving gender equality on company boards is an important aim, but we are against rigid quotas” – and employers’ organisation the Confederation of British Industry has also indicated that it will oppose any such rulings, saying that it believes that “… the best and most sustainable way to promote diversity in the boardroom is by selecting candidates from as wide a talent pool as possible, and by making appointments based on merit.”

There has also been little sign of any major British companies breaking rank with this school of thought and establishing their own system of targets and quotas, along the lines of Deutsche Telekom, which leads us to wonder if, as laudable as the CBI’s model undoubtedly is, it is really enough to fix that leaking pipeline and create a more gender balanced, European wide, workforce.

Any such EU mandated legislation would give the impacted companies just five years to double the numbers of senior business women; how likely is it that those interventions, attitudes and tools are already in place, enabling us to get there on our own without being forced into it by law?