Rules outlined in a binding European Union (EU) directive will force most financial firms to set a target for the number of women on their board of directors, effective from 2014.
In one of the first regulatory moves to enforce gender equality on the boards of financial companies, banks, building societies and investment firms will also be required to outline how they will endeavor to meet their goal.
The EU’s Capital Requirements Directive IV previously raised this issue, calling for larger financial companies to implement a nomination committee to help it select board members fairly. Such a group would be expected to identify a ‘target for the representation of the underrepresented gender on the management body and how to meet it.’
Both UK financial regulators – the Prudential Regulation Authority and the Financial Conduct Authority – recently published consultations on the directive that further explore the EU’s plan, asking how any changes should be reflected in new regulatory guidelines.
A Thomson Reuters study from July finds that companies with mixed-gender boards perform better than those with no women serving on them. The research, entitled ‘Mining the metrics of board diversity’, also finds that only 17 percent of companies report having boards consisting of at least 20 percent women.
Among the FTSE 100, only 17 percent of board positions are held by women, while only one firm – Burberry – has two female executive directors.
Some commenters, however, have criticized the EU’s approach in adopting the directive. Helena Morrissey, founder of the Thirty Per Cent Club – a group of chairmen aiming to improve female representation on corporate boards – says the new regulation is fundamentally unnecessary.
‘The UK is already making strong progress and, to some extent, any regulatory measures emanating from the EU might seem academic as large banks already have stated targets,’ Morrissey notes.
‘Our belief is that, as more women join boards without the imposition of quotas, the more they can demonstrate the value they can add. By the time we get to 30 percent, the system will be self-perpetuating.’
