Gender Balance among Non-Executive Directors (EUC Report)

Baroness Scott of Needham Market Excerpts

Thursday 10th January 2013 Lords Chamber

[Baroness Bottomley of Nettlestone]

I am more sympathetic to the noble Baroness’s argument than I am to people who go excessively far in arguing for the financial returns. Frankly, enlightened businesses have gender-diverse boards, so it is very hard to tell what the variable is. However, there is evidence that where governance is weak, female directors exercise strong oversight. They are very good at managing and controlling risk. When you talk about women and cost control, there is not a household in the country where family members will not immediately nod their heads and say “Yes, it’s the women who are in charge of cost control”.

I am absolutely certain that the evidence about female directors enhancing board independence is valid. Females are more resilient and resistant to groupthink, and that has so often been the case in discussions and debate, whether in politics, in business or in many other enterprises. If part of the causes of our corporate disasters has been groupthink, then I have no doubt that women, with the competence and necessary skill, make a great addition. Their management style tends to be much more appropriate to the modern forms of management than the more didactic, autocratic patterns of the past.

The real issue, of course, is that he who pays the piper calls the tune—and by 2025 there will be more female than male millionaires in this country, and 60% of the private wealth will be managed by women. It is enlightened self-interest to take this topic seriously. Nobody doubts the Government’s commitment in this area. Since the report of the noble Lord, Lord Davies, 49% of non-executive appointments have been women. As I have said, the noble Lord has done a great job and we are all indebted to him, but there are so many architects and investors in this policy, and no one person can be thought to have achieved that change. However, being led by a man—regrettably—has probably been a factor in achieving the necessary results. We are now on target for women to constitute 40% of board membership by 2020.

This is, therefore, a success story, but it is important that it is not a passing fad. It needs the tenacity, the long-term approach and the monitoring. I congratulate my noble colleagues on determinedly resisting the idea that this is an area of EU competence. It will simply be counterproductive in our context. We endorse the importance of this principle and congratulate the Government on the progress to date, and I support my noble friend in his Motion.

[Baroness Scott of Needham Market]

My Lords, my support this evening for the Motion does not in any way detract from my absolute commitment to the need to have more women on boards, for a whole range of reasons which have already been given, but not least because not to have women on boards is an absolute waste of the talent and education in which the country has invested.

The question before us this evening is not about the merits of women on boards, and it is not even about the Commission’s proposals. This evening’s debate is about the question of subsidiarity, and I will focus my remarks on that. This is the second time in a month that the House has been asked for a reasoned opinion. Both requests have come from Sub-Committee B, and as a Member of both that Committee and the EU Select Committee, I can tell the House that we have spent a lot of time not only discussing the specific issues but the general nature of subsidiarity.

I thought that I had a pretty good idea about what was meant by subsidiarity. Indeed, the paper that we are looking at today defines it as acting at EU level where it genuinely adds value to do so and where objectives cannot be met without action at EU level. I think we would all understand, even if we do not agree with it, that there are times when the pursuit of EU objectives such as the single market or the free movement of people clearly requires legislation. However, I do not believe that the Commission’s proposals for gender quotas on boards have met these tests. No one, during the evidence that we took in our inquiry, argued that it was a single-market issue. It was portrayed as, and indeed is, a matter of gender equality, but we already have EU legislation that outlaws gender discrimination, and it seems that we should be looking to the Commission and to member states to take action on that front before bringing in new legislation. I even wonder, although I am not a lawyer, whether a statutory 40% quota would comply with the EU’s own gender equality legislation, since it would enshrine an imbalance.