Gender Balance among Non-Executive Directors (EUC Report)

Baroness Thornton Excerpts

Thursday 10th January 2013 Lords Chamber

[Lord Wilson of Tillyorn]

My Lords, I, too, will speak very briefly and not delay the House too long, partly because I am a relatively new member of Sub-Committee B, at least in its present incarnation; I was a member of a previous incarnation some time ago.

The inquiry into women on boards was the first one that I attended as a member of the present Sub-Committee B and it was a very impressive process. The evidence, witnesses and written submissions that came before us were all very thorough, and everything pointed very clearly in the direction in which the committee itself reported. In other words, it is highly desirable to have more women on boards. It is an underutilised resource. Efforts must be made to increase the number of women on boards. In the UK this is happening steadily. There is no sustainable case for doing anything further by legislation rather than by encouragement. Indeed, most of the female proponents of more women on boards very strongly did not want that to happen. For me, it was a very interesting learning process.

With regard to this directive, the Commission is surely right in saying that it is desirable to have more women on boards. It is an underutilised resource, which is putting it rather mechanically, but it is absolutely true. But it is very strange indeed that the Commission goes on to say two contradictory things. First, it argues—although the arguments against have been quite strong—that there is a direct and positive advantage simply to having more women on boards, rather than the more subtle version that a good company gets women on boards and it is successful because it is a good and open-minded company. At the same time the Commission argues that we need a European-wide directive because there will be some countries that do not want to put themselves at a disadvantage by having more women on boards. It is a bit difficult to square that particular circle.

I do not think that the Commission’s proposals really stand up. Of course, what we are discussing this evening is whether they offend against the rule of subsidiarity. The points have all been made by others so I will not labour them. It seems absolutely clear that European-wide legislation does not add an advantage and that such is the diversity within Europe, with different types and structures of boards, that one size fits all simply does not meet the need of the moment. Therefore, I, too, support the recommendation of the noble Lord, Lord Boswell, that we should put in a reasoned opinion saying that what the Commission proposes offends against the procedures for subsidiarity.

[Baroness Thornton]

My Lords, this is the second debate we have had about this issue. I realise that this is the second report, which deals with a different matter, but it is important that we recognise that as we debate the need for gender balance in positions of leadership in business, this Parliament and this Government should acknowledge their own failings in this area. We have no room to be self-satisfied. With just 22% of our current MPs being women, and just four women—that is, 18%—in the Cabinet, we are on a long road.

[Baroness O'Cathain]

I thank the noble Baroness for giving way. This same argument came up before. This has nothing whatever to do with the place of women as non-executive directors on boards of listed companies. The opposition spokesperson in the other place went that way in his opening statement as well but then came firmly down against quotas and for the reasoned opinion.

[Baroness Thornton]

If the noble Baroness would let me continue, she may find that I will do the same, but there should be no complacency about this matter. That was the only point I was making; and I am sure that she would agree with that. I was about to pay her a great compliment, so perhaps she would like to wait for that, too. It is late, and I do not intend to speak for very long. My honourable friend in the other place was right to raise the issue. The subject of gender balance is important, but we have an underrepresentation on company boards in other respects, which we also need to address. The fact that only 5.7% of FTSE 100 directors are drawn from ethnic minorities is, I think, a problem. That is not the first time that that has been mentioned.

As I have said in the House before, we welcome the report of my noble friend Lord Davies on women’s representation on boards. My noble friend has made it clear that there is a moral imperative to change the state of affairs. There is a very strong case for that. We on these Benches also believe that we should regulate or legislate only as a last resort, but we should not rule out the need to take further action if we do not reach the target set by my noble friend, which we all seriously support—25% of female representation on boards by 2015. I acknowledge that we are on the right trajectory to get there, but more action will be needed.

I congratulate the noble Baroness, Lady O’Cathain, on two things. The first is the excellent report that we discussed in November; and the second is her personal role in encouraging women to come forward to positions of responsibility, not just on boards but in other places. In all my time in your Lordships’ House since 1998, I have seen her as a very good example of what women can and should aspire to and could achieve. Whether we reach those aspirations through the Davies report will become clearer during the next year. We will probably need to return to the subject towards the end of this year, to see where we are and what further needs to be done.

I will not rehearse what action has been taken by the Commission at European level, but a point that I have raised with the noble Lord, Lord Boswell, is that the problem that I have with these Motions is not to do with the arguments about the draft directive and the committee’s reasoned opinion, it is to do with how we in the UK should work constructively in other ways to advance the cause of equality in company boardrooms along with our European partners. We must be very careful not to send the message through this action today that it is in any doubt that we should be doing that.

The Under-Secretary of State for Women and Equalities, in her response to the House of Lords European Union Committee, said that she agrees that the European Union has an important role to play in improving the representation of women on boards. If that is the case, I hope that the Government will say how that should happen, how we should give a lead and what our involvement should be. That debate presents a golden opportunity—although Viviane Reding has raised the issue in the way that she has, we should not get drawn down the road of European protocol and subsidiarity. We have to say what we need to say, but we should also make it clear that the UK wishes to be in the forefront of debate in achieving greater equality in this matter.