Female Board quota

The UK Government has backed a House of Lords report into the EU’s proposals for women on boards.

The government said the mandatory approach was “the option of last resort”. It published its views following a debate on the Lords’ second report in the House last week.

It said “we particularly welcome the committee’s support for the voluntary business-led approach taken by the UK Government and recognition of the business case for gender diverse boards.”

The government backed the peers’ stance that “the efforts made by businesses and governments at national level, mean that action at EU level is unnecessary, and would not provide additional benefits”.

The committee went on to suggest that “the proposal did not adequately take into account the divergent rates of change, board structures and cultural contexts within each member state”.

But it reiterated its support for the “aim of increasing gender diversity on boards”, suggesting the Commission could “usefully assist national Governments through other means”, such as “issuing a non-binding Recommendation to Member States, and taking further action where individual Member States fail to comply with their obligations to combat discrimination”.

The Government backed the Lords report recommendation that “the best target to use is that 30% of board memberships should be held by women, the “critical mass” level identified as a catalyst for cultural change in the boardroom.

This would “stretch governments and companies to deliver sustainable change, whilst remaining achievable in the present climate”.

The report continued: ‘At a national level, the Government should institute a 30 per cent target to be reached by 2017, whilst striving to achieve a 30% level of representation as early as possible. In Europe, the Commission should adjust its 40% target for 2020 downwards to 30%, whether in binding or voluntary proposals in this area.’

In November, European politicians were forced to embark on a complete U-turn on its plans to force listed companies in the region to hire female executives onto their boards, in an effort to boost the numbers of women in senior management, or face sanctions if they failed to do so.

The government report added: ‘We agree that gender diversity should be promoted through corporate governance rules and we were pleased that the Financial Reporting Council amended the UK Corporate Governance Code for listed companies.

‘The Code now requires companies to report on the board’s policy on boardroom diversity, including gender, on a comply or explain basis, and report on progress against any measurable objectives they have set themselves.

‘This is separate and additional to the Lord Davies recommendations which proposed that companies set targets for the number of women they aim to have on their boards by 2015. EU-wide standards are not appropriate given the different corporate governance rules, economies and labour market conditions across member states.’

It concluded: ‘A real culture change needs to take place at the heart of business if progress is going to be sustainable and long-term. We believe we are beginning to see that culture change take place in the UK.’