Gender Balance among Non-Executive Directors (EUC Report)

Lord Elton Excerpts

Thursday 10th January 2013 Lords Chamber

[Lord Kakkar]

My Lords, I, too, support the Motion in the name of the noble Lord, Lord Boswell of Aynho, and declare my interest as a member of your Lordships’ European Union Sub-Committee B, which has considered this issue.

This is a particularly important and sensitive political issue at this time. Across Europe there are real concerns about the future role of the EU, and indeed recognition that there will be a need for renegotiation of European treaties to deal with the Europe that has resulted from the recent financial crisis. It is therefore vital that both national Governments and the Union itself respect the principles and concepts already enshrined in existing treaties, if the respect of the citizens of European nations is not to be lost because there is a disregard by either party for what is already recognised, appreciated and enshrined in those treaties.

The question of competence and subsidiarity, as we have heard from the noble Baroness, Lady Scott of Needham Market, has been reviewed in some detail in the work of Sub-Committee B in considering the issue of women on boards. There is no doubt that, as we have heard, the sub-committee and the European Union Committee have arrived at the same conclusion, as has the other place, with regard to recognising that gender equality on boards is vital on boards and should be respected. However, on the question of competence and subsidiarity, it is also recognised that there are certain areas in the work of the European Commission where the Commission alone is able to act, and therefore competence is reserved to the European Union solely. There are other areas where there is definitely no need for the European Union to act and where competence is retained solely with national Governments. There is a middle area, such as in matters dealing with the internal market, where competence lies both in the hands of national Governments and at the level of the European Union. Here it is important that the principle of subsidiarity is applied with absolute clarity.

On the question of the internal market and gender equality on boards, we can ask—and indeed the sub-committee did ask—a number of simple and straightforward questions. The issues and the answers to those questions were rehearsed during its debate on its main report in November of last year.

With regard to the simple question, “Are national Governments able to act to secure greater gender equality on the boards of publicly listed companies?”, the answer is clearly yes. In this debate we have heard that since 2010 our own country has acted in a most definite and precise manner to encourage the appointment of more women to boards of publicly listed companies and is on target to achieve a 40% figure by 2020.

The second question is: will action at European Union level add value to what national Governments are currently doing? No argument has been made by the Commission in this area. If a single, coherent argument had been made in the directive, it would be right for this national Parliament to consider it and then potentially not be in the position where it had to offer a reasoned amendment. However, no such coherent argument has been made by the Commission and so that particular test and question fail.

The third question is: would the internal market function more effectively if the European Union, the Commission, were to act rather than national Governments? Again, the answer is no. No argument has been made by the Commission that suggests, in any way whatever, that the internal market would function better if the European Union were to legislate with regard to membership of boards, rather than national Governments.

I come back to the very sensitive time in which this question of subsidiarity must be considered. As we know, Her Majesty’s Government will return to Europe and the institutions of Europe shortly to start describing their negotiating position with regard to future treaty amendments. So it is important that the people of our country feel confident in the treaties that currently exist and that the European Commission will respect the principles and bases that form our national understanding with regard to our continued participation in Europe.

I believe that this reasoned amendment is vital. As we have heard from the noble Lord, Lord Boswell, the matter was discussed in the other place on Monday of this week and the other place took a very clear and definite view on it—a view shared by your Lordships’ European Union Committee. I hope that this House will endorse this important Motion.

[Lord Elton]

My Lords, I rise briefly to support my noble friend Lord Boswell of Aynho and to carry forward a little what the noble Lord, Lord Kakkar, said about subsidiarity. When one examines the case put by the Commission, one is left wondering why it was so confident that it would work. Indeed, one is left wondering why it wanted to do it. It seems to me that one finds in the Commission an ambition to govern rather than to guide, whereas from where we sit we feel that the default position should be guidance and that the governing should be done by such a large central body presiding over such different, diverse and distant peoples only when it is essential so to do. I therefore ask your Lordships to bear in mind the points made so cogently by my erstwhile noble friend the noble Lord, Lord Pearson, and also so courageously, because he is always in danger of boring your Lordships. Nothing makes one less popular in this House than boring people, yet it is something about which we need to be not bored but alert. The weight is already so preponderantly in favour of the central Commission and so heavily against national parliaments that we really cannot afford to let one iota of it that we are able to keep slip through our fingers. Therefore, I support the Motion.

[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.