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E.U. considering quotas for women in business

March 9, 2012

European Commission Vice President Viviane Reding has been in the news lately. In her capacity as Commissioner for Justice, Fundamental Rights, and Citizenship, the Luxembourger has made the increased representation of women in top decision-making positions one of the main priorities of her tenure. Last year, Ms. Reding urged Europe’s largest companies to increase the percentage of women serving on their boards. Citing the fact that women made up only 11.8% of such positions in 2010, she asked companies to sign a pledge to increase that number to 30% by 2015. Now that a year has passed since then, Ms. Reding in recent weeks has discussed her disappointment with the lack of progress made in this area. Not only did merely 24 companies agree to sign the pledge, but progress has been paltry. The 11.8% cited above increased to only 13.7% this year, according to a report (pdf) released by the Commission on March 5.

Furthermore, much of the scant improvement that HAS been is due to France, which instituted mandatory gender quotas last year. France’s success and the absence of progress throughout the rest of the European Union has led some to argue that the time has come to institute such quotas at the E.U. level, given the apparent failure of simply asking businesses to address the problem through self-regulation. According to Ms. Reding, “Personally, I don’t like quotas. But I like what the quotas do. Quotas open the way to equality and they break through the glass ceiling.” Ideas for such quotas at the domestic level are being discussed in various countries. Margaret Hoffman, Vice President of the German Women Lawyers Association, advocates binding rules for gender equality in the boardroom in her home country, where women currently make up only 11% of positions on the supervisory boards of the 30 most important DAX-listed companies. Besides France, in the last couple of years Spain, Belgium, and Italy have implemented similar provisions. (The Commission report linked to above also provides summaries of the legislation in these and other European countries covering this issue; go to Annex 1.)

Ms. Reding has for now “launched a public consultation,” seeking input from businesses and the public on how to address this issue. While the Commission report praises the countries that have instituted quotas at the domestic level, the absence of progress in other countries is one reason some argue that changes at the E.U. level are needed. In addition, having E.U. legislation might simplify things for businesses, as they would not have to contend with different rules in different countries. A public opinion survey (pdf) released in conjunction with the Commission report reveals significant variation among countries both in terms of how people evaluate the problem of women’s underrepresentation in business and their preferred solutions to the problem. On the whole, however, one can say that Europeans are more tolerant of such state-imposed mandates than Americans, where the prevailing ethos seems to be more about equality of opportunity, rather than equality of outcomes. Nevertheless, an E.U. mandated system of quotas would likely face resistance not only from business interests but populations in less statist countries.

Gender quotas have become far more common in recent years in the economic and political realms. In politics, many countries have mandated that political parties include minimum percentages of women among their nominees at elections. (Such mandates are much more practical in systems with proportional representation, compared to single-member district systems such as the one in the United States). Ms. Reding and other supporters of quotas have offered several justifications for them aside from basic concerns for social justice. Specifically, they argue that quotas would be good for businesses, and not just women. Ms. Reding points out that 60% of university graduates are now women, and that by remaining bastions of male dominance, corporate boards are failing to utilize a vast pool of talent and creativity. They also point to research that supposedly shows that companies with higher representation of women on their boards perform more strongly, although there is little academic evidence of a causal relationship. Commenting on the French law back in 2010, Schumpeter’s blog at The Economist argues that quotas merely address the symptoms of discrimination, rather than the root cause, which the blog identifies as the fact that too few women get the right kind of work experience early in their careers to be considered for executive positions.

In any case, the debate over the merits and flaws of quotas, which has already been going on in the countries that have implemented or considered implementing them, will likely reach the European Union level in the coming months.

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