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Baroness O'Cathain
Baroness O’Cathain to ask Her Majesty’s Government, in the light of the Report of the European Union Committee on Women on Boards (5th Report, HL Paper 58), what is their position on proposed EU action to increase gender diversity on boards.
Baroness O'Cathain
My Lords, this is a time when we are making history. The report of the European Union Committee on Women on Boards was published last Friday and we are debating it tonight, which is two working days. This is excellent, of course, but it gives no time whatever for a government response. We hope that they will give one in due course and we look forward to that.
Gender equality has long been one of the core objectives of the European Union. The treaty on the functioning of the European Union is clear that,
“in all its activities the Union shall seek to eliminate inequalities and to promote equality between men and women”.
There has been important legislation, including the 2004 gender directive, which insists that there should be equal treatment of women and men in the access to and supply of goods and services, and the 2006 directive on equal opportunities for men and women in the workplace.
Since 2010 this objective has been vigorously pursued by the vice-president of the Commission, Viviane Reding, and in this country by a number of business leaders, spurred on by the 2011 inquiry by the noble Lord, Lord Davies of Abersoch, at the request of the Department for Business, Innovation and Skills.
The Commission action so far has included in September 2010 the strategy for equality between women and men; and in March 2011 European companies were invited to sign the “Women on the Board Pledge for Europe”, which required that companies should commit to raising female representation on their boards to 30% by 2015 and 40% by 2020. UK action so far has been the Davies report, to which I have already referred, which underscored the benefits of having more gender-diverse boards. The Government have largely accepted the findings of the Davies report but have rejected the ideas of quotas at the EU level.
Sub-Committee B undertook this inquiry because of the topicality and the importance of the issue, its place within the committee’s scrutiny remit and the expected directive from the Commission imposing quotas for women on boards. This proposal was initially expected on 23 October but was postponed. We now expect the directive to be put forward by the Commission tomorrow. So if that is not topical, what is? A leak appearing in FT.com today confirms that the Commission is widely expected to propose some form of quota for 40% of women on boards in plcs within the EU by 2020.
In asking this Question, I thank everyone who has contributed both written and oral evidence to our inquiry; and the members of the sub-committee who worked so hard to produce this report, four of whom are taking part in this debate. I thank them particularly. I also thank our clerks, Mark Davis and Nicola Mason; the policy analysts, Paul Dowling and Sarah Watts; and our committee assistant, Elaine Morgan.
There is a strong case for action in this area. As already noted, gender equality is already a key EU objective. Viviane Reding has made this a priority. The committee found merit in this work to encourage greater female board membership and urges the Government to continue to support the Commission as well as pioneering their own initiatives.
We observed the significant benefits derived from a more diverse board. These include better reflecting the perspectives of customers; challenging established thinking—or “group think” as we are now supposed to refer it; female board members can serve as role models for women within and outside organisations; and the need for fairness and equality of opportunity—for example, in the UK, women make up 45% of the labour force and 60% of graduates, yet only 17% of board positions are held by women in the FTSE 100. In the Cranfield study it was stated that there are 2,500 “board ready women”—that sounds a bit like “chicken ready”. However, we are not convinced by the evidence which has been put forward for a direct link between gender diversity and increased business profitability and would discourage the promotion of such claims in the absence of further and more conclusive research.
On quotas, the Commission is well placed to encourage member states to act in this area. Article 157(3) TFEU allows the EU to adopt legislation aimed at ensuring equal opportunities. However, voluntary progress at the level of member states has been slow. This was the Commission’s key argument for the suggestion that quotas should be imposed. It takes as one example the adoption of quotas in France, where a 40% quota for female board directors is imposed at a national level. However, based on the wealth of evidence the committee received, we considered that similar legislative action from the EU at this level would be inappropriate for four key reasons.
First, to impose EU-wide legislation would jeopardise self-regulatory efforts and the current positive engagement from industry in countries like the UK where businesses are strongly opposed to quotas. Secondly, there is a possible argument that this would undermine the principle of subsidiarity. Subsidiarity being the case, the EU should act only if the proposed action cannot be achieved by the member states at national and regional level. Thirdly, positive non-legislative efforts are already being made in the UK. Fourthly, any legislation which induces quotas is best imposed at national level, and this is already being done in France and Italy.
Quotas would achieve statistical change but neglect the underlying causes and risk fostering the incorrect perception that women on boards were not there by merit—for example, 89% of the 2,600 women who responded to the consultation of the noble Lord, Lord Davies, opposed quotas. Quotas would not address the lack of a sustainable and consistent “pipeline” of women through businesses and onto boards, according to the National Association of Pension Funds.
While in the long-term progress has been disappointingly slow, female representation on boards has increased exponentially in recent years. In 2011-12, we saw female board membership increase by 3.1%, the largest reported increase at FTSE 100 level. Indeed, when I look back at my experience when I had my first FTSE 100 board appointment in 1984, I was one of six women in the whole of the FTSE 100 who had a board appointment. So we have made progress. In March to September 2012, 44% of new board appointments were female.
As to the experience of other countries, which is often quoted, Norway introduced a quota of 40% women board directors in 2003, with a deadline of 2008 for publicly traded companies. The 30% club pointed to the low number of women in executive positions in Norway as a lack of the effectiveness of quotas. Despite 44% of board members being female, only 8% of Norway’s CEOs are female.
Barnali Choudhury, a lecturer in corporate law at Queen Mary College, London, highlighted the disputes surrounding the practicality of quotas despite its strong culture of quotas. She therefore suggested that a one-size-fits-all solution around Europe would be deeply flawed given the variance of such cultural factors.
Too little time has elapsed to assess the impact of quotas on other EU countries such as France and Italy, where legislation is less than two years old. However, it is notable that, despite having quotas in France, the French Administration agree that EU action should begin with non-legislative measures.
Henry-Labordère, Counsellor for Labour Affairs at the French Embassy, was keen to see co-ordination at a European level but believed that a “graduated approach” of “reasonable voluntarism” was the most appropriate first step. We investigated and suggest other measures, including monitoring progress. A number of witnesses suggested that more effective monitoring in the areas of gender diversity of board members could go some way to solving the problems that this report seeks to address. However, witnesses were divided on the best means of performance monitoring. Witnesses also highlighted the merits of voluntary initiative, such as the “comply or explain” element in the voluntary code of conduct which was launched in July 2011. This is significant as it was drawn up by the search firms sector, which has a prominent role in the appointment of board members.
In conclusion, we acknowledge that progress in this area is needed, but that it should be business-led, enabling a sustainable supply of women to move up the “pipeline” and into board positions. Therefore, the imposition of quotas at EU level should be resisted, since they would negate the engagement and goodwill shown by businesses in recent years. The Commission has a role to play in fostering this voluntary approach and should focus on highlighting best practice in the area. While it is beyond our remit, we note also that developing a sustainable supply of female talent may also require broader cultural reform of working practices. As such, we welcome the broad focus at both national and EU level on these wider issues. This is the most important recommendation.
Baroness Ford
My Lords, I thank the noble Baroness, Lady O’Cathain for securing this incredibly topical debate. In the 1980s, she was the Chief Executive of the Milk Marketing Board, then a very important national organisation. She was a powerful role model for many of us who followed her in business. The European Union Committee has delivered a very thoughtful and practical report on this issue. Its preference, and that in the report of the noble Lord, Lord Davies, is for companies initially to have some time to deal with this issue rather than immediately impose quotas. I believe that they are right in this as things are now changing very rapidly. When I was first appointed to the board of a private company 20 years ago, it was something of a novelty. The usual excuse for not having diversity in boards was that not enough experienced women were available. Even if it was true then, which I doubt, it is nonsense now. A whole generation of women have had successful executive careers and form a huge pool of talent available to fill board positions.
However, we need to embed these changes and make sure that they stick. The question is how best to do that. In the minute remaining, I want to say that one thing strikes me as particularly important. We must continue to exert pressure on companies whose boardrooms are still one-dimensional and also on those search firms whose research is particularly weak in this area. We must embed diversity in mainstream corporate governance in line with the UK code. I am absolutely sure that this is the best way to proceed. At the moment, companies show their range of professional advisers in their annual report—their brokers, their auditors, their lawyers—but they do not show their search firms. It would be hugely revealing to have this information made public. I welcome the changes proposed by the Financial Reporting Council in this regard. I believe that it will demonstrate, as lots of us know from our own experience, that certain search firms, as well as certain companies, are much better than others at thinking laterally and behaving inclusively. If the last few years have shown us anything about institutions and organisations in this country, it is that the very best way to effect change is through transparency.
Baroness Scott of Needham Market
My Lords, I want to start by paying tribute to Commissioner Reding. We have seen the value of strong leadership when it is shown in this country, as it is here by the noble Lord, Lord Davies, and Vince Cable. Article 2 of the EU treaty clearly gives a competence in equalities issues and the Commission is quite right to look at the question of women on boards in this regard. While the position of women in the boardroom in countries such the UK and Norway has undoubtedly improved, it is very poor elsewhere in the European Union. For me, one of the most persuasive parts of the evidence we heard was the reminder that the current situation is such a waste both of talent and of the public investment in the education of women if they find their way is barred. Our report therefore sets out some of the ways in which the EU can take action—for example, through monitoring, collection of data, exchange of best practice with the business sector and executive search firms—in the way that the noble Lord, Lord Davies, has done here. I believe that naming and shaming companies who are laggards can be very powerful, particularly if shareholders exert their power.
While I am not against quotas per se, I have serious reservations about them for all the reasons we have just heard. If they were imposed at EU level, it would be difficult to find a quota which would reflect the very different rates of participation across the Union. If a quota were set too high, it would be impossible for some states to reach; if it were set too low, it could actually set women back in other countries. If Government lose that argument and EU quotas are the outcome, I would advise them to negotiate for percentage increases rather than a one-size-fits-all. For me, it is a matter of practical subsidiarity. Whether or not to have quotas and how they should be used is a matter for member states.
Lord Patten
My Lords, I should declare an interest—not mine but my wife’s, now in her twentieth year of uninterrupted service on the boards of FTSE 100 companies. From time to time, as your Lordships might imagine, her ladyship has occasionally favoured me with her views on this subject across the Chinese duvet that quite properly separates our business interests. That said, these are my views, not her ladyship’s. First, I give strong support to the noble Baroness, Lady O’Cathain, and her committee. Secondly, I certainly want more well-qualified women on boards. Thirdly, I agree with the general tenor of the remarks made recently by Burberry CEO Angela Ahrendts when she said on 9 November in response to a question about quotas:
“Just put the best person into the job. It is not about gender, it is about experience, leadership and vision”.
Miss Ahrendts then very generously went on to observe,
“A man could do this job”.
Two of the best quota-free ways of encouraging more women directors are, first, for companies always to remember that women striving for the top make choices not sacrifices. They are not victims as they strive to struggle and juggle family, children and work. Secondly, improving company working practices, styles and rhythms to accommodate this juggling by women has a lot to do with companies’ success. The best companies, the crack companies, have already started this—Amazon, Apple and, indeed Burberry. One can go from A to Z through the list of major companies. It is one of the best non-discriminatory ways of helping more women up the executive leader, itself one of the best routes into non-executive directorships as it happens. It also helps to build better companies.
Lord Haskel
My Lords, as the noble Baroness, Lady O’Cathain has explained, a proposal by Commissioner Reding that there should be a mandatory 40% of women on boards has been legally challenged so fresh proposals are imminent. I add my thanks to our clerk Mark Davis and the team who drafted this report in double quick time so that we can contribute to the debate.
We are convinced that the objective of greater gender balance is right but we have tried to respect and understand the different ways that each member state conducts its corporate affairs. We call for a 30% target before a mandatory 30% quota is enforced. As we explained in box 2, and as the noble Baroness reminded us, the legal basis for gender equality is already in place. Indeed, some member states already have quotas and we list these in Table 1 of our paper. The House is therefore entitled to ask why we should bother. There are practical reasons. First, we think that 30% is the right number. Secondly, during my time in business, I observed that firms got into trouble when they ceased to serve society in order to serve themselves. The banking industry is only the latest example and one way to avoid this, and to keep up with the changes in society, is through diversity. Women are 50% of the society that we serve.
As we point out in our report, one way in which to increase the potential pool of women—and, incidentally, benefit from their knowledge and experience, as the noble Baroness, Lady Ford, reminded us—is to look outside the usual networks. The public sector, the voluntary sector or the women scientists’ concordat. All this is far better than the golf club. I also think that our ambitions must go further than the FTSE 100 companies and should perhaps include all firms in the FTSE 250. I strongly support the EU initiative. It is right to call for penalties, but only as a last resort if the target of 30% is not achieved.
Lord Bilimoria
My Lords, in 2003 I was a member of the Tyson Task Force on the Recruitment and Development of Non-Executive Directors, where we examined,
“how a range of different backgrounds and experiences among board members can enhance board effectiveness and by exploring how a broader range of non-executive directors can be … recruited”.
I thank the noble Baroness, Lady O’Cathain, for initiating this debate and I am relieved to see that the EU Committee’s report is emphatically against imposing quotas. There are two issues here: how can we continue to encourage UK plc to have the most effective boards, and secondly, how can we ensure that UK plc pursues equality of opportunity? It is not just about doing things right, but about doing the right thing because it makes sense.
Apart from chairing the Cobra Beer Partnership Ltd and Molson Coors Cobra in India, for the past five years I have been a non-executive director and the senior independent director of the Booker Group plc, a FTSE 250 company. When I first joined the board five years ago, there were no women, but that situation has changed. I am proud to say that we have a very effective board that has seen the company’s value increase virtually five times in five years. What is key is finding the best individuals for the board with diverse skill sets, backgrounds and experience that are as relevant to your business as possible, and increasingly that should include international experience. It is the responsibility of the chair to search as widely as possible to find these individuals, as well as the responsibility of headhunters. Although it is good news that more than 50% of FTSE 250 companies now have at least one woman on their boards, we could do so much more. As was said earlier, the Cranfield University School of Management, of which I am a proud alumnus, in its 2012 Female FTSE Board Report identifies more than 2,500 women who are ready and capable of taking on board positions.
We need to persist in encouraging and highlighting the benefits of diverse boards, and in particular having more women on boards. The report of the noble Lord, Lord Davies, is doing this in the same way as the Cranfield University School of Management report, and in the way that the EU Committee’s report is doing it. Jennifer Harris, the managing director of Board Intelligence, wrote last year that:
“Boards make important decisions and diverse boards might make better ones”.
From my experience, I have seen that they definitely do. I shall conclude by saying that we need look no further than your Lordships’ House. I would go so far as to say that this is the most expert and the most diverse upper House in the world. We did not need quotas to achieve this; we have done it because it makes us more effective, and because it simply makes sense.
Baroness Miller of Hendon
My Lords, I, too, would like to congratulate my noble friend Lady O’Cathain on having secured this short and most important debate. I have only served on the board of one commercial public organisation, the Crown Agents, and I therefore do not have the same experience as does my noble friend following her very distinguished career in the world of high-powered finance. However, I do have the experience of being involved in the very long campaign to get more women into Parliament, as an early founder and later the director of the 300 Group, and I was also deeply involved in the campaign for more women to receive appointments to public bodies. That campaign has been partially successful as regards the other place and even in your Lordships’ House, and progress continues to be made—although only slowly as regards appointments to public bodies and the senior Civil Service.
The one thing that the two campaigns have in common is that women do not want to be refused appointments to company boards simply because they are women, but equally they do not want to be appointed only because they are women. They do not wish to be the token woman on the board to make it look good. Neither of those actions is in the interests of the shareholders. It is true, as the former Equalities Minister, the Member for Hornsey and Wood Green, is reported as saying in today’s Daily Telegraph, that having children—and worse still, the possibility that they may do so—is an impediment to some women’s careers. But still I am hopeful, if not confident, that women are on the edge of a breakthrough—it sounds as though they might very well be—and that they will simultaneously shatter the glass ceiling and put an end to the malign influence of the old boys’ network. Given that so many men have spoken in this debate, I hope that they will forgive me for that one little remark.
I hope that today’s debate will come to the attention of shareholders, especially the institutional shareholders of public companies, and that they will use their influence to ensure that the vast talent of 50% of the population is put to its fullest and best use. That is all I want to say other than to look to my noble friend and thank her once again for having called for this most interesting debate, one that has encouraged so many gentlemen to speak so well about our sex.
Lord Giddens
My Lords, unlike other noble Lords who are speaking in this debate, I am a strong supporter of obligatory quota systems for gender equality, and certainly at the national level. They create a platform for advance that no other approach can rival. We have a lot of evidence on this. Voluntary approaches by and large do not work, no matter how ambitious they are. After more than a century of struggle for women’s rights, 86.5% of board members in the EU are still men—that is almost 90% after such a long period. That shows that we are dealing with very deeply embedded forces. Radicalism of all sorts is required on the issue, not only for reasons of social justice but because of the need to tap an unused reservoir of human capital. We owe the EU Commissioner, Viviane Reding, a debt of gratitude for putting the issue so forcefully on to the EU 2020 agenda, even if her original proposals do not look as though they will go through.
I have two questions for the Minister. First, what plans do the Government have not just to implement the recommendations of the Davies report but to go beyond it, especially to introduce some form of sanction? Without sanctioning mechanisms, we are not going to get near the targets. Secondly, does the noble Baroness agree that only those countries that have introduced enforced quota systems have made fast and substantial progress? We know the famous case of Norway, but in a whole string of other countries there has been a dramatic change in the course of even a year or two after the introduction of such legislation.
Lord Smith of Clifton
My Lords, the situation is not improving. In the past year there has been a reduction in the number of female FTSE 100 CEOs from four to two. The recent reshuffle has seen a reduction in the number of women Cabinet Ministers. Furthermore, to add insult to injury, job for job, women are paid £400,000 less over their working lives than their male counterparts. They also receive less than half the average amount in bonuses than men in the same positions, and women directors are twice as likely to be made redundant. Increases of women directors in FTSE 100 companies have invariably been in the non-executive category. Among the FTSE 250 firms, the situation regarding women directors remains dire. Some 94 out of the FTSE 250 companies have no female board members.
The Government remain opposed to quotas, preferring to encourage a voluntary code. “Nudging” is not effective, as the noble Lord, Lord Giddens, has just said. Both major companies and the Cabinet will fail to meet the 25% female participation targets by 2015, as set by the noble Lord, Lord Davies. Mandatory quotas merit the most serious consideration.
I am saddened by the number of women who, against all the odds, have achieved commendably high positions in the corporate world but nevertheless decry the introduction of quotas. They seem to feel they have to be more macho than the boys, who self-servingly reject quotas. The fact is that these protestations fly in the face of the evidence: quotas do work, and not just in Norway. Within the UK quotas have worked very well. Following the Patten report, the Police Service of Northern Ireland was required to apply quotas over a 10-year period to improve the recruitment of Roman Catholics. The target was achieved well before the 10 years had passed and, what is equally significant, it led to a marked increase in the recruitment of women from both communities, up from 12.6% to 26%. That is a fact, and will the Minister in winding up the debate please confirm that?
Lord Moynihan
My Lords, I ask the Government to reflect on the themes in the European Union Committee report in the context of the boards and committees that provide governance in the specific sector of sport and recreation in the United Kingdom.
Last week in your Lordships’ House, I called for an end to the ban on women members in certain golf clubs, including the Royal and Ancient in St Andrews. Today I broaden the theme to focus on the wider role of women in British sport administration. Maria Miller, as Secretary of State in the Department for Culture, Media and Sport, also has responsibility for women in society, and I urge her to address this issue as a priority. Where are the women sports editors? Why are women so underrepresented on the boards of British sport’s governing bodies?
Following the London Olympic and Paralympic Games, which so vividly demonstrated the impact of girl power, the number of women on the international sports federations and the International Olympic Committee—with its 118 men and 24 women, a ratio reflected on many of our governing bodies of sport—falls short of where we should be in the 21st century. As the Times editorial on 27 October stated:
“There are not many sports whose governing structure would withstand the pressure of scandal. The governance of sport is one of the few institutions where the disinfectant of scrutiny has not yet been applied”.
I call on the Secretary of State to initiate an inquiry into why women are so underrepresented in the running of British sport. These are golden days for British sports men and women, able-bodied and disabled. It is time that the role of women in the administration of British sport was afforded the priority it deserves. The fact that governing bodies are overwhelmingly funded by the quangos that operate through government appointments, as well as the influence of Whitehall, makes this an area in which the Government can take action. I urge the Secretary of State to do so now.
Lord Kakkar
My Lords, the strong arguments for broad female membership of company boards has been very powerfully made by the noble Baroness, Lady O’Cathain. I will focus on the areas of legality with regard to the proposals that have been made, or may be made, by the European Commission, and the question of competence with regard to this area of legislation. We heard reports in late October that the EU legal service challenged the Commission over the legality of strict quotas being imposed on publicly quoted companies. The report suggested that it would be impossible under current EU treaties to impose quotas or to apply strict sanctions to companies that failed to meet those quotas.
During this investigation, your Lordships’ European Sub-Committee B also covered the area of competence with regard to the EU in this area. Legal advice available to the committee indicated that the EU was indeed competent to act in this area, but evidence received by the Minister, Jo Swinson, giving oral evidence on 15 October, indicated very clearly the view of Her Majesty’s Government that the EU did not have competence in this area. I have two questions for the Government. When entering negotiations once these proposals are finally presented, will their position be that the European Union is or is not competent to proceed in this area? Secondly, do they consider the imposition of quotas legal or illegal under European law?
Baroness Noakes
My Lords, I congratulate my noble friend Lady O’Cathain on her report and on this debate. I support getting more women on boards but I want to achieve that through merit not discrimination. The effort to get women on long lists is fine, but that is where discrimination should end. The debate often equates diversity, which is a good thing on boards, with more women. This is wrong. Female board members are not automatically more diverse than their male counterparts. Concentrating on gender diversity risks losing sight of what real diversity can contribute to board success. The report is brave to say that the economic case for more women on boards has not been made. The enthusiasts have confused correlation with causation, and I hope that Ministers, including my noble friend on the Front Bench this evening, will stick to the evidence in future and not make assertions about improved performance and productivity.
I believe that focusing on the proportion of board membership achieves diversity box-ticking without achieving sustainable change. Because the proportion of executives on boards has declined from around one-half to around one-third over the past 10 years, the focus has therefore been on non-executive appointments. However, in my view the debate needs to shift decisively towards the much more difficult issue of women executives. Why is it that management boards still look unbalanced? Why are the women who are there are often in functional roles rather than general management ones? This is partly about working practices, as the report suggests, but also about culture—as the report also suggests—and the hidden barriers in workplaces and the implicit assumptions about career patterns. These are not areas that board percentages can tackle.
Lastly, I cannot support even a reserve right of Brussels to legislate on quotas. The report should have used a little more Anglo-Saxon directness in telling the Commission where it should put its quotas.
Lord Clinton-Davis
I thank the noble Baroness, Lady O’Cathain, for all she has done to advance this cause. Arriving at a more equitable situation between men and women on boards is ultimately desirable. However, it depends on being able to recruit women of real ability. It must be done within a limited time and satisfy the requirements of all the members of the EU. I have no doubt that to impose quotas at this stage would be a mistake. Some member states prefer legislation while some combine both. Others, such as ourselves, prefer a voluntary approach.
But what if insufficient progress is made? The sub-committee said that the voluntary approach must be given a fair time to work. That is entirely right, but at the end of the day, if it does not work, quotas should be applied. Two issues are absolutely vital. First, the EU should preferably act in concert. Secondly, there is no place for backsliders.
Lord Freeman
My Lords, first, I congratulate my noble friend Lady O’Cathain on this very interesting and important debate. I will share with your Lordships my limited experience over the past 15 years in the private sector.
Mandatory quotas in France, where I have served on a major company board, have been accepted and work. In Norway, quotas have been working, to the best of my knowledge, for five to six years now. However, I do not believe in mandatory quotas applying to the United Kingdom at this stage, for a number of reasons. The excellent and energetic work of the noble Lord, Lord Davies of Abersoch, in trying to encourage professional services firms, particularly the big accounting firms and the merchant banks in the City, to recruit more women to the board seems to working. If that does not work, I withhold judgment as to whether there should be legislation, although I am not in favour of that at present.
The public sector has got a major example to set in encouraging more women to stand for or apply for positions, whether that is on the advisory boards of different departments or serving in the other parts of the public sector. We have not done enough, and Ministers should take responsibility for what I call the “pull”. As far as internal promotion is concerned, within management below boards, that is where we are failing and I very much agree with my noble friend’s comments just now. We are seeing a glass ceiling, certainly in professional firms, which is nothing to do with women deciding to leave to have families and come back later on. It is important that they are regarded as qualified candidates to rise right to the top. However, at the moment, I am not in favour of legislation in the United Kingdom.
Baroness Thornton
My Lords, I start by thanking the noble Lord, Lord Moynihan, for his comments. The noble Baroness, Lady Grey-Thompson, was worried that she would not be able to be here to make the points that he so adequately made, so I am sure that she will be extremely pleased by his remarks. He was quite right. I wondered how I could possibly squeeze any of those sporting remarks into my two minutes.
Lack of women on boards is a waste of talent and potential. It is a terrible waste of talent and potential right now. I congratulate the committee on its work, although it is a shame that it set its sights against quotas so completely. It is also a shame that the newly appointed Minister for Women and Equalities, Maria Miller, instead of taking a positive stance on this matter, as most noble Lords have done, chose to attack the Labour Party as being obsessed with quotas. We have not said very much recently about them. Instead of celebrating successes achieved and talking about how to make progress, she decided instead to have a go. That is a great shame.
My understanding of what is to come out of Europe in the next 24 hours or so is that member states already taking action will be exempt from quotas if they get up to 40% of non-execs by 2020. That is eight years away. Does the Minister think it possible for the UK, with the progress that we have made so far, to reach 40% by 2020? We should be able to.
I am proud that Labour took action to ensure that women are better represented in Parliament and politics, for example. We now have more women than all the other parties in Parliament put together. That does not mean that there is not a long way to go. How will the Government put their own house in order on these matters? I draw attention to research published in Sunday’s papers, secured by my honourable friend Luciana Berger MP. It is about government departments and their appointments at a senior level. I will share with your Lordships’ House the bottom five. BIS is the fifth bottom. It managed to recruit 25% of women in the last tranche of senior appointments that it made. Fourth from the bottom is Defra with 23.5% of women. Third from the bottom is the Department for Transport: 16.6% of its recent appointments were women. Second from the bottom is the Treasury, with 14.2%, or two out of 14, of the last senior appointments that it made being women. At the bottom is the Department of Energy and Climate Change, with one out of 15 appointments, or 6.6%. That is simply not good enough. It seems that the Government need to get their own house in order.
Earlier this year, the Prime Minister said that he did not rule out going further and using quotas as a way to get women into top executive jobs. This weekend, we saw the Minister for Women and Equalities say that that was absolutely out of the question. Perhaps the Minister in this House would clear up whether it is Ms Miller who is right or the Prime Minister.
Baroness Stowell of Beeston
My Lords, first I congratulate my noble friend Lady O’Cathain on securing this debate so swiftly after publishing the committee’s report on Friday and ensuring that it is possible for us to discuss this important issue in a timely fashion. I also congratulate all noble Lords on their contributions today. Perhaps it is a reflection of the lack of time available to noble Lords that no one else mentioned this, but I thought it striking that in this debate about women on boards we have had contributions from nine men and seven women. That is interesting in itself.
On a topic such as this, lots of statistics have been mentioned and I will mention more in the course of my response, but with the exception of the remarks just made by the noble Baroness, Lady Thornton, it was also interesting that it was noble Lords rather than noble Baronesses who spoke in support of quotas. The noble Lord, Lord Giddens, as one of those noble Lords, referred to representation in the European Parliament. It is worth noting that, in the Commission, of the 26 Commissioners 17 are men and nine are women. I am not here to speak for them, but it is none the less worth mentioning.
As my noble friend acknowledged, the Government will want to consider the report’s findings carefully and respond in detail. Our immediate reaction is that the report is thorough and comprehensive and we welcome it. I am pleased that the committee concluded that quotas are not the way forward in bringing about change and that the voluntary business-led approach that we are taking in the UK is a much more effective way of achieving long-term, sustainable change.
Noble Lords raised a wide set of issues. To respond, it is probably best to start with the Government’s position on the proposed EU action. As we all know, a proposal was put forward by Vice-President Reding in October which was not voted on. As has been mentioned, it is expected that a formal proposal will be put forward tomorrow. I will not—I am sure noble Lords would not expect me to—respond to any speculation about what might come out tomorrow, although I acknowledge, as has been mentioned, that there is a report in the FT today speculating on what might be said. Our basic position is that we welcome a discussion at the EU level about the best approaches to increase the number of women on boards. We welcome the efforts by Vice-President Reding to keep this issue high on the political agenda. We want more women on boards and in senior positions.
My noble friend Lady Scott of Needham Market was the first to raise the question of competency in the remarks today. There is a role for the European Union to ensure that good practice is shared and data are collected. There is also competency for the EU under its responsibilities to ensure equality in member states. However, we do not agree that quotas are the answer to our desired objective to have more women on boards and we will resist any effort by the European Commission or European Union to impose them. We take that position and do not support quotas because many member states have recognised the need to take action and are doing that in ways that they think best suit their own national needs. In many cases they are making progress.
The noble Lord, Lord Giddens, mentioned the success of quotas in Norway. That is right and, if it works for those in Norway, who am I to stand in their way if they think that adopting quotas is right for them? We do not think that quotas are the right approach for the UK. It is also worth noting that, while they have had success in Norway in terms of non-executive appointments, they have not had a correlation in the success of executive appointments. Because we think that member states are best placed to take action, we therefore question whether, under the principle of subsidiarity, there is a case for the Commission to impose quota legislation. The noble Lord, Lord Kakkar, asked about that and I hope that I have been able to clarify the difference. He also referred to evidence that my honourable friend Jo Swinson gave to the committee. When she talked about competency, she was talking about the role of the EU in terms of governance arrangements on boards. As to his direct question about whether imposing quotas would be illegal, that is premature. We do not know what the Commission will propose and I would not want to set out what we might do until we know exactly what it will put forward.
We do not accept that quotas are right for the UK. Member states, like business, need to be able to respond to the changing environment and varying needs of the business community. An inflexible, one-size-fits-all quota system is not the answer. That point was also made by my noble friend Lady Scott of Needham Market. If countries decide that they want to adopt quotas, that is a matter for them. When there are different types of governance arrangements for boards in different countries, one size across all areas would not work. In this country, the majority of women are not in favour of quotas. Certainly we in the Government feel that quotas address the symptoms and not the cause of women’s progress. As mentioned by other noble Lords, women want to be appointed to senior positions based on their skills and experience, not because of their gender.
The representation of women on boards and in positions of authority in all sectors is important. At this point, I pay tribute to my noble friend Lady Miller of Hendon for all her work in promoting the cause of women in Parliament. She is right to remind us that it is not just in the public sector that it is important to have women in positions of authority. This point was also made by my noble friend Lord Freeman. I take on board his point that the Government and public sector need to take the lead in this area. As to what the noble Baroness, Lady Thornton, also said about the Civil Service, clearly there needs to be progress. However, although I do not have the statistics to hand, over the last 15 years there has been quite a significant improvement in the number of women in senior roles. While I would not suggest for a moment that this progress should not continue and that more cannot and should not be done, we must not believe that when a woman moves out of a post we are taking a backward step.
As much as we believe that it is right to have women in positions of power, we need to be clear why we believe that businesses would benefit from more women in senior positions. My personal view is that women need to hear that they are wanted. We are more likely to widen the pool of talent if we can spell out to women who perhaps would not naturally put themselves forward why having them in these positions is something that we want. We agree with the findings of the committee’s report that there is no causal link between more gender diversity on boards and stronger financial performance. It is difficult to find conclusive evidence for the economic impact of increasing the number of women on corporate boards. However, the correlation between strong business performance and women’s participation in management is striking. I noted the example given by the noble Lord, Lord Bilimoria, and his experience on the board on which he sits.
The report of the noble Lord, Lord Davies, has been referred to on several occasions. It is clear that the case for greater diversity hinges not only on the link with improved corporate performance, but also on ensuring that companies access the widest talent pool, are as responsive as possible to the markets that they serve and look to improve corporate governance. My noble friend Lady O’Cathain referred to other issues, including dealing with groupthink.
The Davies report is the approach that we are following here in the UK to try to improve the representation of women on boards. We believe that it is right to take the voluntary business-led strategy set out by the noble Lord, Lord Davies, in his report. As noble Lords know, he set out 10 recommendations aimed at increasing the number of women on boards and, 18 months on, women now account for 17.3% of non-executives in the FTSE 100 and 11.3% of FTSE 250 board positions, which is real progress. There are now only eight all-male boards remaining in the FTSE 100, which is down from the 21 of 18 months ago.
The voluntary code of conduct written by the executive search firms has played a key role in the progress that we have seen in the numbers of women attaining boardroom positions. It ensures that women are treated fairly within the recruitment process. In terms of our own learning, this is certainly something that we seek to share with other member states. However, a lot more still needs to be done if we are to meet the Davies target of having 25% on FTSE 100 boards by 2015.
I will make a couple of additional points on this. The noble Lord, Lord Haskel, pointed to the suggestion in the committee’s report of a target of 30% by 2020. In response, I would say that the report of the noble Lord, Lord Davies, was very much about minimum targets. That 25% is a floor, not a ceiling. Furthermore, the noble Lord and his committee went to great lengths to set a target that was both stretching but achievable by 2015. However, that does not rule out the possibility of going further. I would certainly not want to give the impression that that would be the end of the matter.
The noble Lord, Lord Clinton-Davis, asked whether quotas should be used if targets do not work. He is right to ask that—I think that the noble Baroness, Lady Thornton, also raised the question. It has been said both by the noble Lord, Lord Davies, and by the Prime Minister that there remains a last resort if all else fails. However, we want to pursue this voluntary approach and there is evidence that it is working. The most important thing is that if ever this country decided that it wanted to set targets, we should take that decision for ourselves and not have it imposed on us by Brussels. The noble Lord, Lord Giddens, asked whether there would be sanctions if the 25% target was not reached. My response is that, once we start imposing sanctions, we are inevitably introducing quotas by another name.
The pace of change needs to be accelerated. What has been acknowledged is that, while we are making real progress in the non-executive ranks of boards, we need to see much greater change among the executive director roles. That was mentioned by my noble friends Lady Noakes and Lord Freeman. Currently, women account for only 6.6% of those at executive director level of FTSE 100 companies, which is very disappointing. Addressing this issue is complex and it will take some time to see actual progress. However, the 30% Club and the Women’s Business Council—a group put together by this Government—are looking at this issue.
I went to a press launch today where the Conservative Women’s Forum announced that it would be looking into the barriers preventing more women from reaching senior executive positions. I think that we all want to understand which common barriers get in the way of allowing women to get into those senior management roles. As the Deputy Prime Minister announced today, initiatives such as greater choice around flexible working and flexible leave are issues that will have a positive effect once we are able to make progress in that area.
Because I am running out of time, I will just acknowledge that my noble friend Lord Moynihan mentioned women in board positions in sport. I will of course raise that with my right honourable friend the Secretary of State. I also want to make the point that transparency and monitoring are a very important part of ensuring that we make progress. I note what the noble Baroness, Lady Ford, said about seeing whether the new reporting requirements could be extended to search firms. I am not able to commit to that, but it is an interesting idea.
We will continue to work with businesses, investors, directors and chairmen to spread the word that diversity makes economic sense. Some success has been achieved, but we need to increase the pace and gain greater momentum. My noble friend Lady Miller said that women are on the edge of a breakthrough. I hope that that is the case. Certainly, boards can change, and they can and will change without regulation. If I have not been able to cover any point that has been raised today, I will write to noble Lords.