Women on Board The state of art of quotas regulation

in Europe

Isabella Lenarduzzi

JUMP www.jump.eu.com

JUMP is the leading social enterprise working with organisations and individuals to close the gap between women and men at work, achieve sustainable corporate performance and create a more equal society.

The gender Diversity Ecosystem by McKinsey and the correspondent JUMP initiatives

European figures

Still a long way to go!

Women in executive committees (2011)

Women on boards – end 2013

Source: European Commission 2013

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Source: European Commission, Database on women and men in decision-making

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Chavanat A. et Ramsden K. « Mining the metrics of Board diversity ». Reuters Thomas 2013

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Actions promoted by governments

“The quota law has opened boardrooms to an extent that we’ve never seen before,”

Mari Teigen, research director, Norwegian Institute for Social Research

Overview of measures in place

Norway

•Norway was the first country in the world to implement board quotas • Numbers of women on corporate boards have risen from only 6% in 2002 to over 44% today. • "By not utilising the full talent pool I knew Norway as a nation was missing out. My ambition as a Minister was to force companies to rethink their board recruiting practices. I believe we succeeded," Ansgar Gabrielsen (Former Minister of Trade) •“We have invested billions educating our daughters as much as our sons,” Gabrielsen said. “Their ongoing exclusion from corporate boards, which are an important part of our society just doesn’t make economic sense”

Norway, the law

• The law demands that public shareholder-owned corporations (called ASAs in Norway) must have an average of at least 40% women and 40% men on their boards or face dissolution.

• The law came into force in 2008 and related to 7,000 seats on boards. The compulsory percentage of gender diversity varies according to the number of seats concerned: 1 in 2 or 3 seats; 38% of 8 seats; and 40% of more than 8 seats.

Norway, the results

• Position: Only 3% of chairs are held by women. • Age: Women are younger than men on boards. The majority are

less than 50. The older men on boards were not replaced by women but when recruiting new members they recruted women.

• Education: Women tend to be better educated than men. There are fewer of them with science and technology degrees but more with law degrees.

• Experience: More women than men are managers in companies or come from academia but more men than women are business owners.

• Recruitment: Women were recruited in the same manner as men, mostly through professional networks. The phenomena of the concentration of power and the so-called “golden skirts”, which defines a number of women who serve on several different boards at the same time, is a very common idea. The research proved that golden skirts was a men’s wear with 62% holding only one board position instead of 79% of Women!

Norway, the results

• The more visible and skilled the women the more advantages they had. For example, as the research suggests, these women always choose the biggest companies.

• Sixty percent of male board members said there had been no major changes to board operations since the law took effect but there were some improvements: “more discussions” and “new perspectives”.

• Several top Norwegian business leaders said they were “opposed in principle” to quotas and still are, but believed the law has been effective. Fears of not finding enough qualified women to fill board seats proved unfounded. “I’m in principle against quotas,” said Harald Norvik, chairman of Telenor and former CEO of Statoil. “But I’m happy with the result,” he added.

Norway, the results

Adverse consequences • Since the law on quota, the number of public-listed

companies has fallen. The research highlighted that 33% of companies choosing not to list on the stock exchange did so to evade the quota regulation.

• Since the law was enforced, there has been no further debate on gender diversity in Norway but the balance is still far off: the quota law did not change the number of women CEOs (2%) or their presence in the Executive Committee (10%). The private limited companies that didn’t have to comply with the law saw an increase of women on their boards from 15% in 2004 to 17% in 2009!

France, the law

• Law adopted in January 2011

• 2014 to get to 20% and 2017 to get to 40% of women

• To be applied to large listed companies with more than 500 employees and more than 50 million € revenues

• Penalty: no validity of board decisions

• First results : from 8% in 2008 to 30% in 2014

Belgium, the law

•Law adopted 30 June 2011

•30% to be reached for each sex in …

- 2014 for public owned companies

- 2018 for listed companies

- 2020 for SMEs

•Penalty : no revenues of any kind for board members + nullity of new board nominations

Initiatives

With the legislation on equality in Belgium, the proportion of women in parliaments has risen more than 20% in ten years

Italy, the law

• The law was adopted on the 29th of June 2011

• Objective : 20% from 2012 and 33% from 2015 – The reality is 15% in 2014 !

• Only for listed companies

• Penalty : several steps from warning to financial sanction (up to 1 million€) and decay from boards

Netherlands, the law

• The law was adopted in May 2011

• First to be in both boards and exec – 30% of women

• Validity of 4 years (2012 – 2016)!

•Objective 40% in 2016. But the reality is 25% in 2014

• No penalty – only explanation of efforts undertaken

Spain, the law

• Law adopted in 2007

• Objective of 40% of each sex by 2015

• No penalty – but taken into account for public subsidies or state administration contract

• Results: 4% in 2006 to 11% in 2010

The European Commission

The European Commission's proposal (November 2012): 40% target combined with binding rules on a transparent selection process; Selection based on qualifications and merit and a preference rule in case of equal qualification; Companies listed on stock exchanges, privately or publicly owned; Except: small and medium-sized companies (SMEs); High degree of flexibility for Member States, subsidiarity-friendly; The EP's first reading report largely endorsing the Commission’s approach (November 2013);

Executive V/S Non Executive

Non – executive director’s objective

An obligatory quantitative objective of 40% for non-executive directors (supervisory boards), tied to procedural requirements.

Deadlines: by 1 January 2020 (or 2018 for public undertakings).

Executive directors

•Companies have to set individual targets for executive or management board members.

•The same deadlines and reporting obligations apply, but not the procedural obligations related to appointments.

At this rate of change it will take …

Conclusions

1. Intervention makes a difference in progressing towards equality on boards

2. Self regulation builds ground for legislation

3. Quota legislation is most effective when endorsed by sanctions

4. Effective self-regulation requires targets, deadlines and state-endorsed monitoring

Conclusions (2)

5. Mid-term targets help to meet long-term goals

6. Progress towards equal representation for women and men is slower for executive board positions

7. Quota legislation does not increase the number of female CEOs

8. Awareness raising and promoting women help reaching targets

Quotas are not a scandal – what is a shame is that we need it!

Conclusion

Women’s energy and talent are the most untapped renewable sources

of energy in the world!

Isabella Lenarduzzi

Founder and Managing Director of JUMP

isabella.lenarduzzi@jump.eu.com

+32 3 346 32 00

info@jump.eu.com

jump.eu.com

www.jump.eu.com