EU Report: Women on Boards

Baroness Stowell of Beeston Excerpts

Tuesday 13th November 2012 Lords Chamber

[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.