Gender representation on corporate boards of directors

Gender representation on corporate boards of directors refers to the proportion of men and women who occupy board member positions. Globally, men occupy more board seats than woman. This disproportionality is being addressed in various ways by both governments and corporations.

Equality of Treatment

The desire of governments and corporations to reduce the disproportionality on corporate boards is rooted in the principle of equality of treatment. Equality of treatment requires that all people be treated equally, regardless of societal prejudices. Equality of treatment may mean either equality of opportunity or equality of outcome, with the former being the preferred interpretation by many Governments.

Many countries have opted to pursue this principle through their constitution or through various forms of legislation. For example, in Canada, section 15 of the Canadian Charter of Rights and Freedoms guarantees equality rights, which includes gender equality. Similar legislation relating to equality can be found in other jurisdictions, including the Equality Act 2010 in the United Kingdom. Generally countries that adopt board gender quotas tend to have several pre-conditions: female labor market and gendered welfare state provisions, left-leaning political government coalitions, and path dependent policy initiatives for gender equality, both in the public realm as well as in the corporate domain.[1]

Current Landscape

There are two metrics that are generally used to examine the proportionality of women on corporate boards, (1) the percentage (%) of companies that have at least one woman on their board, and (2) the percentage (%) of women holding Corporate Board seats.

Canada

Amongst FP500 companies, the title given to the 500 largest companies in Canada based on revenue, approximately 60% have at least one woman on their board. In 2011, women held 14.5% of Corporate Board seats in Canada. This represents a 0.5% increase since 2009.[2]

United States

Amongst S&P 500 companies, 90% have at least one woman on their board. In 2012, 17% of the Corporate Board seats of S&P 500 companies were held by women. This represents a 3% increase since 2006.[3]

United Kingdom

Amongst the FTSE 100 companies, 93% have at least one woman on their board. This represents a 14% increase since 2011.[4]

Other European Countries

In 2012, the number of European companies with at least one woman on their board was 86%. This represents a 25% increase since 2004. Note that this figure for Europe as a whole does not highlight the differences amongst certain European countries. For example, in five Scandinavian countries there is at least one woman director on every board. However in Greece, Italy and the Netherlands, almost a third of all corporate boards are still male-only. Furthermore, close to half of corporate boards in Portugal and Luxembourg are male-only.[5]

Percentage of women on boards of directors (2011)[6] %
Norway 36.3
Finland 26.4
Sweden 26.4
France 16.6
Denmark 15.6
Netherlands 13.1
Germany 12.9

Note that part of the increase in female representation on corporate boards has come about due to the regulatory and corporate responses that have already been put into place, as discussed in the Regulatory Responses section below.

Regulatory Responses

Equality of Outcome

One approach taken by governments has been to enact legislation requiring a set quota for female representation on corporate boards. This quota system typifies equality of outcome, an approach to equality that is concerned with the result rather than the means of achieving such a result.

Norway

In January 2006, the Norwegian government introduced quota legislation that required both public and state owned companies to have 40% female board representation by January 2008. Failure to comply resulted in fines or company closures. Full compliance was achieved by 2009. The percentage of female board members has since remained between 36% and 40%.[7]

France

In February 2011, a bill was passed requiring 40% female directorship by 2016. This quota is to be implemented on two schedules, one for private companies and one for public companies. Public companies will require 20% female board representation within three years, and 40% within six years. Private companies will have nine years to reach the 40% quota. Failure to comply with these schedules will result in voided nominations and suspended remuneration of board members.[8]

Belgium

Belgium passed a law on requiring 33% female directorship by 2018 introduced in the new article 518bis of the Company Code. Failure to comply with these schedules will result in voided nominations and suspended remuneration of board members.

Canada

Quebec’s Bill 53, passed in 2006, is the only provincial legislation currently in effect that deals with gender representation on corporate boards. This bill requires an equal number of men and woman on the boards of Crown corporations.[9]

At the Federal level, two bills are currently being tabled: (1) Bill S-217,[10] which will impose a 40% quota for female board members of public companies and other regulated entities such as banks and insurance companies; and (2) Bill-C473,[11] which will balance the gender proportionality of directors serving on boards of state corporations by establishing minimum participant requirements by gender.

The Glass Ceiling

Enacting quotas through legislation is one way to respond to the challenges presented to women seeking board positions. However, some argue that quotas inadequately address the larger structural issue known as the glass ceiling. Board members are typically appointed in one of two ways: (1) internally, through in-firm appointments of high level executives such as CEOs; and (2) externally, through appointments made from outside of the firm. Quota systems geared towards a more equal proportionality on corporate boards function by targeting the gender representation of the board, rather than targeting the pool from which candidates are appointed. So although a board may be more proportional, the pool from which appointments are being made remain unchanged and largely disproportional.[12]

Norway

Norway’s quota system has provided for a significant increase in the number of women on corporate boards. This increase has yet to alter the way that women progress through organizations. In Norway, the percentage of women on corporate boards was approximately 40%. Despite this proportion, women account for only 2% of CEOs and 10% of executive committee members, which make up the candidate pool for internal appointments.[13]

United Kingdom

The disparity between internal and external appointments to corporate boards also arises in jurisdictions that have not instituted a quota system. In 2013, 48% of the female executive directors in the United Kingdom were internally promoted, compared to 62% for males.[14]

Equality of Opportunity

Another approach to addressing the disproportionality on corporate boards has been the adoption of the “comply or explain” governance system. This system requires companies to address the issue of proportionate gender representation with regards to board and executive appointments, and if not, to explain why.

The “comply or explain” system exemplifies equality of opportunity, an approach to equality whereby all people should be treated similarly, regardless of prejudices, preferences, or historical disadvantages, unless particular distinctions can be justified.[15] The “comply or explain” system allows market forces to determine whether corporate policies are appropriate by publicizing the issue of gender representation for shareholders and customers to see. Failure to comply with this system results in shareholder discontent and bad publicity for the company. This directly influences the company’s image and profitability.

United Kingdom

In 2012, the United Kingdom implemented a mandatory “comply or explain” system to address the disproportionally on corporate boards through the UK Corporate Governance Code. Unlike a quota that sets a specific proportion and is often criticised for failing to account for merit, the UK Corporate Governance Code allows corporate boards to implement their own gender diversity policies and explicitly requires merit as a consideration. The UK Corporate Governance Code requires companies to annually report on their boardroom gender diversity policy as well as their executive management appointment practices, and if not, to explain why.[16]

Sweden

Despite their “comply or explain” system, women in Sweden rarely hold executive management positions in large companies. In 2004, the Swedish Annual Accounts Act was amended in order to force companies to disclose information on gender proportionality amongst managerial levels in its annual reports. The government justified this amendment as they suggested it would lead to more women in executive positions and a larger pool of candidates for internal appointments to corporate boards.[17]

Finland

In 2008, Finland implemented a “comply or explain” system which required both genders to be represented on corporate boards, and if not, to explain why. A particularity of Finland’s approach is the requirement of at least one man and one woman on every board. This hybrid approach utilizes a “comply or explain” system and a quota to further its goal of gender proportionality on corporate boards. Women account for approximately 24% of corporate board members, up from 12% before the implementation of this hybrid approach.[18]

In 2012, the Finland Chamber of Commerce implemented a mentoring program for women in mid to high-level managerial positions as a supplement to their current approach. This program included mentoring, seminars and networking opportunities; providing these women with the tools to become candidates for executive management positions, and to qualify for internal board appointment.[19]

References

  1. ↑ Terjesen, S., Aguilera, R., & Lorenz, R. 2015. “Legislating a Woman’s Seat on the Board: Institutional Factors Driving Gender Quotas for Boards of Directors.” Journal of Business Ethics. 128(2): 233-251. Also available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2327576
  2. ↑ Catalyst Accord: Women on Corporate Boards in Canada, online: Catalyst <http://www.catalyst.org/catalyst-accord-women-corporate-boards-canada>
  3. ↑ Karyn L. Twaronite, “Women on Boards: Moving from ‘Why’ to ‘How’” Forbes (8 January 2013), online: Forbes <http://www.forbes.com/sites/forbeswomanfiles/2013/01/08/women-on-boards-moving-from-why-to-how/>
  4. ↑ Cranfield University School of Management, The Female FTSE Board Report 2013, (Bedford (England): Cranfield University, 2013) at 6, online: Cranfield University <http://www.som.cranfield.ac.uk/som/dinamic-content/media/Research/Research%20Centres/CICWL/FTSEReport2013.pdf>.
  5. ↑ Egon Zehnder International, European Board Diversity Analysis 2012 at 2, online: Egon Zehnder <http://www.egonzehnder.com/files/european_diversity_analysis_2012_1.pdf>.
  6. ↑ TD Economics, Special Report: Get on Board Corporate Canada (7 March 2013) at 1, online: TD <http://www.td.com/document/PDF/economics/special/GetOnBoardCorporateCanada.pdf>
  7. ↑ UK Department for Business, Innovation & Skills, Women on Boards (UK: Department for Business, 2011) at 22, online: GOV.UK <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31480/11-745-women-on-boards.pdf>
  8. ↑ UK Department for Business, Innovation & Skills, Women on Boards (UK: Department for Business, 2011) at 22, online: GOV.UK <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31480/11-745-women-on-boards.pdf>
  9. ↑ Bill 53, An Act respecting the governance of state-owned enterprises and amending various legislative provisions, 2nd Sess, 37th Leg, Quebec, 2006, cl 43(2) (assented to 14 December 2006), SQ 2006, c 59.
  10. ↑ Bill S-203, An Act to modernize the composition of the boards of directors of certain corporations, financial institutions and parent Crown corporations, and in particular to ensure the balanced representation of women and men on those boards, 1st Sess, 41st Parl, 2011, (second reading 16 December 2011).
  11. ↑ Bill C-473, An Act to amend the Financial Administration Act (balanced representation), 2nd Sess, 41st Parl, 2013, (first reading 25 February 2013).
  12. ↑ Zena Burgess & Phyllis Tharenou, “Women Board Directors: Characteristics of the Few” (2002) 37 Journal of Business Ethics 39-49, online: University of Toronto: Centre for the Study of Education and Work <http://wall.oise.utoronto.ca/inequity/3burgess.pdf>
  13. ↑ UK Department for Business, Innovation & Skills, Women on Boards (UK: Department for Business, 2011) at 26, online: GOV.UK <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31480/11-745-women-on-boards.pdf>
  14. ↑ Cranfield University School of Management, The Female FTSE Board Report 2013, (Bedford (England): Cranfield University, 2013) at 7, online: Cranfield University <http://www.som.cranfield.ac.uk/som/dinamic-content/media/Research/Research%20Centres/CICWL/FTSEReport2013.pdf>.
  15. ↑ (Paul de Vries (2011-09-12), equal opportunity, Blackwell Reference, retrieved 2011-09-12)
  16. ↑ Financial Reporting Council, The UK Corporate Governance Code, 2011, at 12, online: Financial Reporting Council <https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-September-2012.aspx>
  17. ↑ Finland Chamber of Commerce, Consultation on Gender Imbalance in Corporate Boards in the EU, 2012, at 4, online: Financial Chamber of Commerce < http://ec.europa.eu/justice/newsroom/gender-equality/opinion/files/120528/all/143_en.pdf>
  18. ↑ TD Economics, Special Report: Get on Board Corporate Canada (7 March 2013) at 1, online: TD <http://www.td.com/document/PDF/economics/special/GetOnBoardCorporateCanada.pdf>
  19. ↑ Finland Chamber of Commerce, Consultation on Gender Imbalance in Corporate Boards in the EU, 2012, at 4, online: Financial Chamber of Commerce < http://ec.europa.eu/justice/newsroom/gender-equality/opinion/files/120528/all/143_en.pdf>
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