EU defends women-on-boards plans

The European Commission has defended proposals for there to be at least 40% women non-executive directors on the boards of big listed companies by 2020.

Justice commissioner Viviane Reding postponed the launch of the policy last month when EU lawyers warned compulsory quotas might not be enforceable.

The proposals instead set out a 40% "objective", with unspecified sanctions against companies flouting the rules.

Critics said the directive had been watered down and would be ignored.

The EU proposals say that companies must have clear, gender-neutral criteria for choosing non-executive directors and that if candidates are found to be equally qualified, then preference should be given to women.

But as long as companies have suitable systems in place, it appears that they will not be penalised if they do not manage to meet the 40% level by 2020.

The plans need approval from the European Parliament and Council of Ministers.

The UK, one of a number of countries to oppose stronger measures, welcomed the Commission's decision not to impose mandatory quotas for women on boards.

"We remain fully committed to increasing women's representation in UK boardrooms, but along with like-minded member states, we have consistently argued that measures are best considered at national level," said UK Business Secretary Vince Cable.

Non-executive directors are members of a board who oversee its activities, but are not involved with its day-to-day activities, so it excludes board members such as chief executives and chief financial officers.

At the moment, 85% of non-executive directors are men, according to the European Commission.

'Breakthrough initiative'

The Commission said the proposals applied only to non-executives, "so as not to interfere with the freedom to conduct a business".

Mrs Reding called the proposals "a breakthrough initiative" and disputed the suggestion that they had been watered down and would not be enforced by member states.

"Member states who put the directive into national law have to foresee biting sanctions in order that the companies which do not apply the law can be forced into doing it," she told BBC News.

Alison Cooper of Imperial Tobacco will soon be one of only two female chief executives in the FTSE 100

The directive will not apply to any company that employs fewer than 250 people, or to companies that are not listed on a stock exchange.

UK Minister for Women Maria Miller said that the voluntary approach had been quite successful so far, with 44% of appointments to FTSE 100 boards in the last six months being women.

"We think it's very important that whatever we do in this area, we are taking companies with us," she said.

"Simply mandating a target or a quota on to a company... is not really getting to the root of the problem, which is making sure we have a pipeline of women coming through our corporate structures to be able to be effective operators at board level."

The UK's current position comes from the Davies Report, which said that companies had to voluntarily increase the proportion of women on their boards to 25% by 2015 or the government would take action to force them to do so.

An exemption added "late on" allows for countries to impose their own system for getting more women on boards, a Department for Business spokesperson said, adding that it was exploring whether the Davies approach would qualify.

In subsequent negotiations, it also wants to make sure that if a company has a suitable appointment process in place but still fails to reach the 40% ambition by 2020, it is not automatically exposed to sanctions, the spokesperson added.

'Compromise'

Mrs Reding said she was confident that the proposals would have enough support to come into law in 2014.

Some campaigners were keen to see EU-wide sanctions such as fines against companies that failed to meet their quotas, but that has not been included in the proposals.

Mrs Reding pointed out that the document published on Wednesday was the first legal text to have appeared and so could not have been watered down.

However, the BBC has seen the copy of a letter sent by Mrs Reding to member states last week, in which she outlines "important modifications" to the legislation.

These items, in what she describes as the "compromise text", include:

• making the 40% objective an obligation to put procedures in place to try to achieve 40%, rather than an obligation to get to 40%

• companies would not face sanctions for simply missing the target. They would only be punished if they missed the objective and had no procedures in place to try to meet it

• references to possible future moves to increase the objective above 40% were removed

'Wheels of change'

Of the 26 members of the European Commission, nine are women, just under 35%.

Critics of the proposals published by the Commission argue that they do not go far enough.

"This new proposal from the EU appears to be the worst of both worlds," said Helen Wells from the gender equality campaign Opportunity Now.

"It seeks to impose a single numerical goal on companies, without any sense of where they are now or their existing commitments to action, but is not enforceable and so will be widely ignored."

But others said it was a step in the right direction.

"As of today the wheels of change are in motion, said Gabriele Birnberg at Matrix Knowledge Group, which advises firms on government policy.

"The EU decision will force organisations to not just think about the issue but recognise the need to take firm clear action."

Eleven EU member states already have laws to promote gender equality on company boards, but the Commission said it was important to have EU-wide regulation to avoid complications for multinational companies.