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Europe moves toward quotas for female CEOs

8:58 AM, Dec 4, 2012   |    comments
EU Justice Commissioner Viviane Reding presents proposals for gender balance on company boardsNov. 14 at the EU Headquarters in Brussels.(Photo: Georges Gobet, AFP/Getty Images)
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LONDON -- When then-Deutsche Bank CEO Josef Ackermann quipped in 2011 that women in management positions would make life "more colorful and prettier," the uproar was predictable.

But what has come to surprise many Europeans since then is how bitter the fight over gender equality has become.

Over the past few years, there has been growing momentum in Europe pushing mandatory quotas for women in the public arena but also on the boards of private companies.

Last month, European Union Justice Commissioner Viviane Reding introduced contentious legislation requiring publicly traded companies across the EU to fill at least 40 percent of board positions with women by 2020 - or be hit with sanctions to be decided by the EU countries.

That's because in Europe, only one in eight top companies have a female CEO. Women make up only a quarter of senior managers and 10 percent of board directors of the continent's largest companies.

In Germany, Europe's economic powerhouse, 13% of senior management positions are held by women, and only 2% of board members of top German companies are female.

Monika Schulz-Strelow, president of the German group Fidar (Women on Boards) says it has been a man's world for far too long.

"Men have had the unfair advantage for hundreds of years," said Schulz-Strelow. "Nobody ever asked men about this unfair advantage of having 95% men always in those positions. You only talk about it with women."

Germany's upper house of parliament, the Bundesrat, recently approved a bill to guarantee that women make up 20% of supervisory boards at publicly traded companies by 2018 (and 40%by 2023). But the legislation faces an uphill battle in the lower house.

Germany's head of state Angela Merkel, the first woman to become chancellor of Germany, has said often she prefers voluntary measures over mandatory quotas.

Many agree. A British House of Lords Committee report last month argued that mandatory quotas would not stimulate change.

"They generate negative perceptions among women and business leaders and do not address the root causes of inequality," said the report.

The number of women CEOs at Fortune 500 companies in the USA rose to 20 by August, which a new record, according to Forbes.

The United Kingdom, where 20% of senior management is female, joins Germany at the bottom 10 economies in the world for women in senior management along with the Netherlands with 18% and Denmark with 15%.

As a result, the British government last year introduced a raft of voluntary measures which has significantly increased the numbers.

Companies are encouraged to be more transparent by publishing their targets and details of their efforts to nurture female talent. They are now required to report on diversity at board level, and this will be extended to other levels in the future.

Mary, Baroness Goudie, a founding member of the UK's 30% Club, which encourages companies to voluntarily increase the number of women on their boards, warned that mandatory quotas could in fact damage business.

"Quotas can actually be harmful to the development of diversity and are not the best way forward," she said. "The United Kingdom is a great example of where a merit-led approach to gender diversity on company boards does work."

Even so, laws introducing mandatory quotas for women have been passed in France, Spain, the Netherlands, Belgium and Italy over the past few years.

Norway was the first to introduce quotas for women in the private sector in 2004. Now, nearly 40% of non-executive board members of publicly listed companies there are women.

"If you want a transformative change, if you want something to move forward faster, you sometimes have to impose mechanisms to reach that," said Hilde Tonne, executive vice president and head of group industrial development at Norway's largest telecoms company Telenor.

She rejects criticism that quotas lead to tokenism, or the hiring of women who are not as qualified as men available for the same job.

"You want someone to be there because they are the best candidate," she said. "I think you get more and more competent women to choose from and you get more and more men that have had to compete with women so they are more competent now as well."

Others, including prominent businesswomen, say quotas interfere with the rights of companies to determine what is best for their businesses.

"We oppose it out of principle," said Nina Solli at the Confederation of Norwegian Enterprise, an employer's association. "Owners of companies should be able to decide who is on boards of directors. We are in favor of the goals of diversity on boards and in management but not with these kinds of strategies."

Opinions are divided in academic circles also.

Research from Leeds University in England found that having at least one female board member reduced by 20% that business's chances of folding - while having more than one reduced the odds even further.

But a 2010 study from the University of Michigan found that the immediate results of quotas were poorer performance of the boards.

"The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance, consistent with less capable boards," the study showed.

Even so, supporters and opponents of quotes agree that more sweeping change is necessary to diversify business leadership.

"It's no longer really this fight for a quota," said Schulz-Strelow. "A quota is just a little instrument. Because when we have a quota or when the work starts, the big change is a change in the culture of the companies."

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