Gender Balance on Corporate Boards

Edward Leigh Excerpts

Monday 7th January 2013 Commons Chamber

[Matthew Hancock]

We are discussing it because the EU has put forward a proposal. Whether we think it is right that it should do so is exactly what we are debating. I have an awful lot of sympathy with what my hon. Friend says. In fact, I think I agree with all of it, although I am always cautious about saying that I agree with all of anything in case I missed something or misunderstood.

[Mr Edward Leigh (Gainsborough) (Con)]

Will my hon. Friend give way?

[Matthew Hancock]

May I make a little progress? I shall come to some of these points in detail.

The Government are committed to increasing the number of women on boards. In the coalition agreement we pledged to promote gender equality on the boards of listed companies, and we did so for a good reason. Historically, the proportion of women on boards has been too low. In 1999 women made up just 6.2% of the boards of FTSE 100 companies. By 2004, that was 9.4% and in 2010 it was 12.5%. In 2010 there were only five female chief executive officers of FTSE 100 companies.

As the House will know, we published the review by Lord Davies of Abersoch in 2011 and have been working to implement the recommendations. The Davies review identified several barriers preventing women from reaching senior roles in business. The research shows that people have an unconscious bias to reward and promote people who are like themselves. Davies found that informal networks are highly influential in determining board selections and that a lack of transparency over selection criteria continues to be an obstacle to progress. Davies also suggests that differences in the way men and women are mentored could be giving men the edge over their female peers, for the clear reason that there are fewer women in senior roles to act as mentors and role models for female colleagues.

--- Later in debate ---

[Matthew Hancock]

Yes, I do agree, but these things have to be done on merit. As it happens, later this month I am leading a trade delegation to India, and the business side of that trade delegation will be led by a woman. I hope that I have satisfied the right hon. Gentleman.

[Mr Leigh]

We all agree that this should be business led, but can the Government block this or will it go through on qualified majority voting?

[Matthew Hancock]

I will come to the point that, under the principles of subsidiarity in the Lisbon treaty, should there be enough motions in national Parliaments across the Union, that is enough to ensure that the Commission cannot introduce the current draft proposals.

We want a business environment in which woman can and do take their seats at the boardroom table on merit and in which businesses can respond to the varying needs of their sector, size and type of business. We need to tackle those problems without unduly burdening business. That is the substance of the challenge of getting more women on boards. It is clear that the Government have taken a lead on that and things are moving in the right direction, and the current strategy is leading us towards the target that the EU has proposed.

I will now move on to the argument about whether this should be an EU competence at all. The Government’s position is clear: we believe that member states must retain the flexibility to respond to their own individual circumstances. Today’s debate is about allowing Parliament, as distinct from the Government, to express its view on whether this should be an EU competence. The Government are strongly of the view that the principle of subsidiarity should be respected and adhered to. The principle of subsidiarity rests on two tests that a Commission proposal must pass: the necessity test, which is that the objectives of the proposed action cannot be sufficiently achieved by member states acting alone; and the EU added value test, which is that the objectives can be better achieved by action at EU level. Under protocol 2 of the Lisbon treaty, national Parliaments may raise an objection, referred to as a “reasoned opinion”, if they do not believe that a draft proposal is compliant with the principle of subsidiarity.

The Government’s explanatory memorandum, which was sent to the European Scrutiny Committee by the Under-Secretary of State for Women and Equalities, sets out the Government’s assessment of whether the Commission’s proposals meet the principle of subsidiarity. We find that they do not. There is no reason why member states cannot achieve the objectives by acting alone and there is no evidence that value would be added through EU involvement. Indeed, the Commission’s own impact assessment found that the evidence base for demonstrating the need for, and proportionality of, binding EU action was “very weak”, stating that members states had a

“proven ability to act in this area”

and that

“a number of Member States had taken measures which appeared to have achieved significant progress”.

I hope that list includes us.