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Quotas For Women On Corporate Boards: Why Not?

Two prominent European female politicians make the case for imposing a quota system to ensure more women make it into top management positions.

(world economic forum)

By Viviane Reding and Françoise Grossetête

It is time to shatter the "glass ceiling," once and for all. Enabling women to realize their full professional potential is not only a question of equality, it is also a matter of economic necessity. The current reality is, alas, discouraging: only one member in ten of company boards of directors in the European Union is a woman, and only three percent of CEOs are female.

In Europe, progress has so far been extremely slow: the share of women on boards has grown by only half a percentage point per year over the last seven years. At this rate, it will take another fifty years to achieve boardroom parity between men and women!

Equality between women and men is one of Europe's founding principles. Since 1957, the principle of equal pay for equal work has been included in the Treaty of Rome. Several European countries have already paved the way for a quota system: In 2003, Norway was the first country to establish a 40 percent quota of women on boards, followed by Spain in 2007 and Iceland, which adopted gender quotas last year. In January, France, the cradle of equality, adopted a law stipulating that by 2017, women must represent 40 percent of board members on the largest publicly traded companies. In Germany, the political class is debating whether to impose such a change. Austria also plans to take action.

Quotas are of course controversial. They amount to using strong-arm tactics to break the "glass ceiling," but their effectiveness is undeniable: in Norway, the share of women on corporate supervisory boards increased from 25 percent in 2004 to 42 percent in 2009; in Spain, the participation of women on boards has risen from 4 percent in 2006 to 10 percent in 2010. If quotas can help us make things happen, they should remain as a transitional measure, to be applied as a last resort.

We will proceed in two stages. Firstly, it will be up to the companies themselves to offer solutions. In the coming months, the European Commission and several national governments will meet with CEOs from the largest publicly traded European companies to hear their proposals. Self-regulation can effectively help increase the presence of women at the highest levels of decision-making, but it must be monitored very closely. In the absence of convincing progress, the second step would be clear: Europe will impose legally binding quotas. The ball is now in the camp of the business world.

The need to strengthen the presence of women on company boards has never been greater. According to a study by management consultants McKinsey, the operating income of companies with the most women on their boards is 56 percent higher than that of businesses with only men in high management. Boards in which women outnumber men are better at auditing, monitoring and controlling risks than boards composed exclusively of men. Beyond this, women take 80 percent of household purchasing decisions - and that's not just which bread or washing powder to buy. Ask around you who chose the last computer!

We want Europe to put its foot on the accelerator with regards to the representation of women on company boards. Let's set ourselves ambitious goals! By 2015, boards should be 30 percent female, and by 2020, 40 percent. It would of course be preferable if the European business world could reach these goals on its own initiative. But if it cannot, we are ready, if necessary, to adopt binding rules from 2012.

We must act now. At a time when we are exposed to a risk of slowing economic growth and rising unemployment in the wake of the public debt crisis, we cannot ignore the potential of half the population. Some companies have already realized that parity is good for business; others, however, have been slower to react. The winds of change are blowing hard and corporate decision makers must choose: either to ensure that the "glass ceiling" is smashed by itself or with outside intervention to ensure the first crack.

Viviane Reding is vice president of the European Commission and European Commissioner for Justice. Ms. Françoise Grossetête is a European Parliament member from France.

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