And yet it’s coming: a gender quota in business leadership

Ms Viviane Reding — Vice-President, Member of the Commission responsible for Justice, Fundamental Rights and Citizenship

Women’s Finance Forum

Hamburg, 27-11-2012 — /europawire.eu/ —  Key statements:

We did it: yesterday, the European Commission made gender equality history. After years of empty promises and failed self-regulation by the business sector, we have decided to take action. At my suggestion, the Commission has proposed a directive that will smash the glass ceiling that blocks progress up the career ladder for many women.

We intend to raise the proportion of women in non-executive board-member positions in publicly listed companies in Europe to at least 40 percent by 2020, paving the way for women to take up top-management positions.

We cannot afford to waste a pool of talent which we urgently need. If we want to maintain our competitiveness and stay ahead of demographic changes, we need more women at work, especially highly qualified women.

Everywhere, companies are complaining about the lack of highly qualified employees. But these same companies are ignoring well-educated and highly talented women. Sixty percent of university graduates are women: they often obtain better grades than men and are more likely to finish their studies.

The very opportunity offered by the current crisis has been squandered. Yes, we saw a high turnover in top jobs in the financial sector. But are we now seeing more women in the boardroom? No! According to a German Institute for Economic Research [DIW] survey, the proportion of women in executive boardrooms for 2011 was as low as in previous years: 3.2 % in the largest 100 commercial and savings banks and 3.6 % in the 59 insurance companies surveyed.

The debate on a European quota has demonstrated one thing: those for or against the quota cannot simply be divided into camps based on gender or political leanings. The ‘for’ camp and the ‘against’ camp include men and women, as they do liberals, conservatives and socialists.

The time is right for a quota. And I am pleased to see that what began at the Bavarian representation in Brussels is now being carried on in Hamburg. After all, it was Hamburg that pushed forward the draft law approved by the German Bundesrat which lays down a 40 % quota for women on supervisory boards. We are pulling together.

Ladies and gentlemen,

I am delighted to be able to be here with you today. And I am even more delighted that I can live up to the title announced for my speech. ‘Eppur si muove – and yet it moves’, said Galileo, who was sure of his ground. And so I can say to you today: ‘And yet it’s coming: a gender quota in business leadership’. Or should we say: it is here!

We did it: yesterday, the European Commission made gender equality history. After years of empty promises and failed self-regulation by the business sector, we have decided to take action. At my suggestion, the Commission has proposed a directive which will smash the glass ceiling that blocks progress up the career ladder for many women. We intend to raise the proportion of women in non-executive board-member positions in publicly listed companies in Europe to at least 40 percent by 2020, paving the way for women to take up top-management positions.

But do you know where this proposal started life? Have a guess. Bavaria! To be precise, it was in the Bavarian EU representation in Brussels. I can still remember it quite clearly – you can even read about it if you don’t believe me. It was 14 September 2010 and I gave a speech there about the European Commission’s new strategy for gender equality. I know such a topic does not sound very exciting and I remember that the media did not mention the EU’s gender equality strategy at all afterwards…

However, my comment that if self-regulation did not increase the proportion of women in the boardroom, I was ready to ‘wield a legislative cudgel as a last resort’ did hit the headlines, but not until 2012. At the time, I set a target of 40 % for the proportion of women in non-executive board-member positions by 2020. I also stated at the time that this target should only apply to large publicly listed companies and not to small and medium-sized enterprises. As you can see, I have kept my word. The legislation saw the light of day yesterday and it follows these very goals.

But let me stress that, at the time, I was not a fan of quotas. I have always tried to show that I do not owe my position to a quota and that I progressed through merit alone. However, I have been obliged to change my mind. Why? Because I have seen that we will not make progress in any other way, and because I have also seen that countries which introduced legal quotas met with success. I am thinking mainly of Italy and France here. I feel that it is necessary for the push to come from Europe, as gender equality has been under the EU’s jurisdiction from the outset.

Why propose a directive?

In the European Union, we have been fighting for equality between men and women in the workplace for more than fifty years. And we have already achieved a great deal in the areas of equal pay, maternity leave, discrimination and work-life balance.

However, one area has remained immune to all attempts to introduce equal opportunities: the top management of companies. Corporate boardrooms are still dominated by men who hold 85 % of non-executive board-member positions. The situation is even worse in European financial institutions, such as the European Central Bank, the European Investment Bank and the European Investment Fund, where women occupy only 9% of such positions – no surprises there.

In Germany, at the beginning of this year, only 15.6 % of supervisory board members in DAX 30 companies were women – just over the EU average of 15 %. That this figure is not lower is mainly thanks to female employee representatives. The situation is even worse for management board-member positions. Only 4.2 % of management board members were women, which is less than half the EU average of 8.9 %.

The figures are just as bad in the world of finance, a world you all know well. According to a Governance Metrics International survey carried out in 2011, banks, insurance companies and financial service providers have more women in top management positions throughout the world than the chemical or automotive sectors, with 10-11 % as opposed to 7 % and 4 %. However, these figures are rather disappointing overall.

The very opportunity offered by the current crisis has been squandered. Yes, we saw a high turnover in top jobs in the financial sector. But are we now seeing more women in the boardroom? No! According to the German Institute for Economic Research [DIW] survey, the proportion of women in executive boardrooms for 2011 was as low as in previous years: 3.2 % in the largest 100 commercial and savings banks and 3.6 % in the 59 insurance companies surveyed.

There is a higher proportion of women in supervisory board-member positions. Women hold 16.6 % of such positions in commercial and savings banks and 13.1 % in insurance companies. The proportion of women in supervisory board positions has been raised through co-determination: employee representatives make up 70.9 % of women in such positions in commercial and savings banks and a massive 94.7 % in insurance companies. In comparison to the previous year, the proportion of women representing shareholders has fallen again.

We must also examine these figures in the light of the fact that, for many years, women have made up the bulk of employees in the financial sector. In 2011, women made up 57 % of the workforce for financial service providers and 49 % for insurance companies. In spite of this, there are not many women filling the top jobs in banks and insurance companies.

We are therefore still a long way from gender equality. If we continued with a yearly increase of 0.6 % in the average proportion of women in top management positions, as has been the case since 2003, we would need over forty years to reach an acceptable balance. We are moving forward at a snail’s pace.

That is why Europe is setting the pace. Or rather, the Commission is.

We cannot afford to waste a pool of talent which we urgently need. If we want to maintain our competitiveness and stay ahead of demographic changes, we need more women at work, especially highly qualified women.

Everywhere, companies are complaining about the lack of highly qualified employees. But these same companies are ignoring well-educated and highly talented women. Let us look at a few interesting facts: 60 % of university graduates are women and they often obtain better grades than men and are more likely to finish their studies.

Leading business schools in Europe have joined forces and, on 12 December this year, they will launch a database of ‘board-ready women’. That is, a pool of 7 500 women who meet all the requirements for top jobs in large companies. The talent is there, it is just not being harnessed. Since yesterday, we now have a have legislation on the table that will ensure that this talent will be harnessed.

And there are very good reasons for having a stronger female presence in top management in German companies. According to numerous studies, companies with more women in management perform better. These studies suggest that companies with women in top management positions achieve better financial results, higher share prices and bigger returns.

This does not surprise me. More diversity means that different aspects are taken into account which, in turn, improves the quality of decisions made. Seventy percent of purchasing decisions are made by women – and we are not talking about washing machines here.

In the Commission, women are also well represented thanks to President Barroso, who has encouraged Heads of State and Government to put forward female candidates for the position of Commissioner: a third of all Commissioners are female – the best representation that we have ever had in the Commission. Moreover, we set quotas for ourselves for 2014 for senior and middle management positions (25 % for senior management and 30 % for middle management), which we will soon exceed. No one can say that we at the Commission do not practise what we preach.

But why can’t we achieve this without a quota?

It is not a case of our not having tried other methods. Since the 1980s, we have issued EU recommendations and relied on self-regulation to increase the proportion of women in decision-making positions. What was the result? Nothing has changed.

Relying on self-regulation in the German economy between 2001 and 2011 did not work. Our last attempt at EU level was my call in March 2011 to European companies to commit themselves to a 40 % proportion of women in the boardroom by 2020. What was the result? Only 24 companies answered the call and most were not publicly listed. On 1 March 2011, I clearly stated that I would give self-regulation a last chance for another 12 months. I wanted companies to be creative so that the legislators would not have to be. And, today, it is clear who was the most creative…

Has any progress been made in Europe? The only real progress has been in countries with a binding quota: Norway increased the proportion of women from 12  % to 40 % within three years in this way. France also had a similar starting point (12  %) and achieved a proportion of 22 % over a period of one year, thus achieving the interim goal of 20 % two full years before the deadline. Legislative measures are therefore – unfortunately – unavoidable if we want to achieve our goal.

So what are our specific proposals?

We are ambitious but we do not want to be heavy-handed.

Our proposal for a directive thus sets a clear target of 40 percent for the proportion of men and women in non-executive board-room positions for publicly listed companies by 2020.

And I don’t want to see a token presence through gender quotas, rather, I want equal opportunities for qualified women. And qualifications are crucial – as I already stressed on 14 September 2010 at the Bavarian representation. No company should be forced to appoint less qualified members to its non-executive boards.

Companies must have a transparent appointment procedure to select new non-executive board members based on objective and gender-neutral criteria. If two candidates have the same qualifications, then preference should be given to the under-represented gender – let’s not beat about the bush – to the ‘woman’.

Executive boards must set themselves a ‘flexi-quota’ goal: companies must set themselves targets for 2020 and produce annual reports on their progress. And I will be keeping an eye on them.

But we will not be carrying this to an extreme:

  • The proposal is limited to large, publicly listed companies which, due to their economic importance, serve as a role model for other companies.
  • Small and medium-sized companies (even if they are publicly listed) are excluded, so as not to put a strain on them.

The 40 % quota only applies to non-executive board-members, that is, only to the supervisory role. It will not interfere with the day-to-day management of a company. However, if companies refuse to comply, there will be penalties. We would like Member States to introduce dissuasive penalties. Companies that do not achieve the 40-percent target must demonstrate that each male candidate really was better than any female candidate. Otherwise, the appointment of a male non-executive board member may be declared null and void. Naturally, the Commission will carefully monitor the implementation of the directive and will take action against defaulting Member States if need be.

The proposal on the table is a sound and balanced one. It has the support of all our colleagues at the Commission, both male and female. Five men, all holding economic posts, presented the proposal jointly with me: Vice-President Tajani (Industry and Entrepreneurship), Vice-President Almunia (Competition), Vice-President Rehn (Economic and Monetary Affairs), Commissioner Barnier (Internal Market and Services) and Commissioner Andor (Employment and Social Affairs). There was also a great deal of support from female colleagues: for example, from Commissioner Georgieva, who is responsible for Humanitarian Aid and who previously held a leading position as a woman in the World Bank owing to her economic expertise, or from Commissioner Damanaki, who pulled out of an important trip to be present at the Commission’s debate on gender parity.

The debate on a European quota has demonstrated one thing: those for or against the quota cannot simply be divided into camps based on gender or political leanings. The ‘for’ camp and the ‘against’ camp include men and women, as they do liberals, conservatives and socialists.

This was clearly demonstrated in Germany just recently when regions governed by the conservative Christian Democratic Union voted in theBundesrat for the draft gender quota that was put forward by a social democrat, Jana Schiedek, the Hamburg Senator for Justice. Or think of the Berlin Declaration, a cross-party initiative launched by leading female German politicians. I saw a similar phenomenon in the European Parliament a few weeks ago when it looked like the proposed quota for women would be stalled. For the first time ever, all the big parties in the European Parliament issued a joint statement to support the Commission’s quota initiative in response to an attempt by certain Member States to block it, even though this attempt was not based on a concrete written proposal…

The quota can be divisive. It can also mobilise people. After the Commission received a letter signed by nine Member States against a European quota for women – admittedly at a point in time in which no written proposal had yet been made – the campaigners came out of the woodwork: Italy – Monti in person – France (the Finance Minister Moscovici and the Women’s Rights Minister Vallaud-Belkacem) and female ministers in Austria and Belgium have launched a counter-initiative. The debate about a Commission proposal was in full swing before a proposal actually existed on paper! I have never before seen such a thing in my political career… which only goes to show that a quota for women is of social and political importance. It is something much bigger than fighting with local telecoms companies and reluctant Member States for lower roaming charges…

And now the quota for women is here. It has come.

A battle has been fought and won. Until the next battle, which we face with confidence and optimism. The support we have from several Member States and, in particular, from the European Parliament, even at a very high political level, gives me confidence that we will succeed.

Ladies and gentlemen, the time is right for a quota. And I am pleased to see that what began at the Bavarian representation in Brussels is now being carried on in Hamburg. After all, it was Hamburg that pushed forward the draft law approved by the German Bundesrat which lays down a 40 % quota for women on supervisory boards. We are pulling together.

Thank you for listening.

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