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Koch-Mehrin on gender balance | AHEAD Newsletter

Article by Silvana Koch-Mehrin in the newsletter “Headway” from AHEAD:

Towards better gender balance in Europe’s boardrooms

The push for gender balance and female representation on company boards in Europe is gaining momentum. The European Parliament and the Council, the body that represents the EU-Member States, will start their discussions on the proposed Directive in the coming weeks with a view to adopting the proposal by the end of 2013. Both institutions stand on equal footing, with the Council voting by qualified majority and the Parliament by simple majority.

Close to these events is Silvana Koch-Mehrin, Member of the European Parliament, and rapporteur of the alliance of liberals and democrats for the quota-legislation. Here she explains the rationale behind their ‘controversial but unavoidable’ initiative:

‘Following years of marginal and insignificant progress, the EU Commissioner for Justice Viviane Reding has stepped in to propose a directive designed to put career progression of both men and women on par, and to do away with the far from proverbial glass ceiling which exists in too many organisations. The figures speak for themselves – women make up only 17% of non-executive boards, and only 10% of executive boards. It’s clear which gender is dominating.

The proposed Directive has been established to pave the way for the less represented gender to take up top management positions by setting an objective of 40% of non-executive directors on the boards of big listed companies by 2020.

Obviously, qualifications and merits of candidates remain the key criteria for board positions. The directive demands a minimum harmonization of corporate governance requirements, as appointment decisions will have to be based on objective assessment. Imperative sanctions will be made against companies not following the legal requirements for quotas. These sanctions will be determined by Member States themselves. The minimum objective of 40% should be attained by 2020 by publicly listed companies, and by 2018 by public undertakings.

Despite the flexibility of the legislative proposal, some Member States and companies hotly contest it. Others welcome it. In some eleven EU-Member States national quota legislation has already been implemented. The vast majority of the Parliaments of the EU-Member States have chosen to support the EU-proposal. However, the directive divides politicians, businesses and corporations. It is controversial, yet supported by experience.

A good example is the economic performance of Norwegian companies after the introduction of mandatory quotas – with a much larger scope than the envisaged EU-legislation. Studies from various countries show that enterprises with a better gender balance deliver stronger organizational and financial performance, e.g. “Women matter” by Mc Kinsey (2007, 2008, 2009, 2010, 2012). The latest research carried out by Credit Suisse Institute (2012) shows that those companies with at least one woman on their board outperformed companies with no women by 26% over the course of six years. Boards then have an opportunity to serve as role models by creating gender balance within their structures.

In these difficult economic times, women have a crucial role to play in getting things back on track. Women account for 50% of the population, and 60% of all university graduates. Why waste this potential?’

‘AHEAD recognises the benefits of diversity and inclusiveness at all management levels,’ comments Managing Partner Guy Vereecke. ‘Indeed firms like ours have an important proactive role to play in ensuring the broadest field possible of qualified candidates, no more so than with new gender legislation on the horizon. Already AHEAD has helped enlightened clients identify and reach scarce or hard-to-find profiles and is always receptive to candidates from under-represented groups with the talent and ambition for further advancement.’

The newsletter can be found on the AHEAD website.