Guest post by Eve Pearce
The Tweet that Changed The World
“It’s done”, tweeted Viviane Reding, the European Commissioner for Justice, Citizenship and Fundamental Rights. Her cryptic message may have whizzed over the heads of countless male CEOS across Europe but to her 18,125 followers, her words were mana from heaven. Reding, who has spearheaded the cause for greater gender equality in the workforce since her appointment, scored the coup of a lifetime: the European Commission adopted her proposed European Union law, whose objective is to secure a quota of 40 per cent women in non-executive board member positions (in large, publicly listed companies) by the year 2020. The issue has caused a great divide between men and women, and indeed, within each respective gender group. Some women feel that reverse discrimination undermines them, but most seem to agree that the measure is the lesser of two evils (ie it beats the proliferation of flagrant sexism in corporate promotion).
The Cold Hard Facts
The facts and figures speak loud and clear; change is necessary. Despite a revealing study by the Credit Suisse Research Institute indicating that companies with females in the boardroom routinely outperformed those without women on the board, gender diversity continues to be sorely lacking in many countries, including the USA. An Ernst & Young report indicates that in six years (from 2006 to 2012), the rise in the percentage of women occupying board seats in S&P 500 companies was a mere 3% (ie women take up only 17% of over 5,000 board seats in these companies); fewer women chair their respective boards (3%), compensation committees (10%) or audit committees (16%); and only 16% serve as financial experts.
The European Connection
In Europe, the outlook is more positive, with an increase in the number of women on boards up more than 2% in just one year. Owing in large measure to Viviane Reding’s initial proposal in November, 2012, to introduce the 40% quota. The number of women on boards is up to 15.8% and the number holding non-executive board positions stands at 17%. In January this year, Commissioner Reding stated, “The proof is in the pudding: regulatory pressure works. Companies are finally starting to understand that if they want to remain competitive in an ageing society they cannot afford to ignore female talent: 60% of university graduates are women. The example set by countries such as Belgium, France and Italy, who have recently adopted legislation and are starting to show progress, clearly demonstrates that time-limited regulatory intervention can make all the difference. The Europe-wide law we have put on the table will make sure existing talent is used boosting gender balance evenly across all company boards throughout our internal market.”
Before delving into how the new law is likely to affect the European corporate panorama, the following should be noted:
- The law is still at proposal stage; in order to come into full effect, it will have to be approved by the European Parliament and by EU Members States represented in the Council.
- The proposed law’s main clauses are as follows:
* If a publicly listed company in Europe does not have 40 per cent of women on its supervisory board, the company will be required to introduce a new selection procedure for board members granting priority to the qualified female candidates.* Qualification is key. Women will not be guaranteed a job on the board just because of their gender.* The law only applies to the supervisory boards or non-executive directors of publicly listed companies. Small and medium enterprises lie outside its scope.* Individual EU Member States will have to lay down their own sanctions for companies that breach the law.* The law is only temporary. It will automatically expire in 2028.* The law includes a ‘flexi quota’: a requirement that companies listed on the stock exchange set themselves self-regulatory targets (to be met by 2020) for gender equity in numbers of executive director positions. Annual progress reports will be required from these companies.
Gender Equity: The Battle Ahead
The European experience reveals that even before the EU Directive was approved by the European Commission, the individual imposition of quotas in countries such as France, Italy and Spain, resulted in a notable increase in female representation on boards. Despite the promising statistics, the gender pay gap has widened considerably in Europe over the past few years. A partial explanation for this could be the European economic slump, which has reflected most in non-executive board members’ fees. Unfortunately, most executive boardrooms still seat almost exclusively male members.
Imposed quotas are one thing, but women still have a huge social hurdle to overcome; an illuminating study by research and advisory organization, Catalyst, suggests that one of the biggest stumbling blocks to gender equity is the way men (and fellow women) perceive women in positions of power. The study involved the participation of 296 corporate leaders, 34 per cent of whom were CEOs. The participants were asked to rate how effective men and women were at 10 essential leadership behaviours. The conclusions were as follows:
- Both men and women engage in gender-based stereotyping.
- Senior managers perceive differences between women and men leaders that may not exist, despite the fact that leadership researchers have undertaken over 40 studies which prove that there is very little difference between men’s and women’s leadership styles.
- Gender stereotypes are the reason for these faulty perceptions. Common stereotypes include notions that ‘women take care of others’, ‘men take charge of others’.
- Women leaders are erroneously perceived as superior to men at behaviours such as supporting and rewarding subordinates; men are perceived as superior at delegating and influencing superiors.
- Women are stereotyped as relatively poor problem solvers and this undermines their power to motivate subordinates.
- Being considered an effective problem solver is linked to higher ratings on other leader behaviours, such as team building and inspiring subordinates. Because women are not perceived by men as competent problem solvers, they are likewise falsely judged as less competent at team building and motivating others. This perception has a Catch-22 effect, undermining women’s actual power to motivate followers. Undermining women’s problem solving abilities is thus one of the core elements of undermining their power to lead.
- Stereotypic biases of senior managers can become stronger under specific work circumstances – for instance, top managers reporting to women have more stereotypical views of women leaders than those reporting to men, and subordinates reporting to women in ‘masculine fields’ like the construction industry are more critical of women leaders than they are of those working in so-called ‘feminine fields’.
- Hiring more women into management positions is insufficient if true gender equality is to be achieved; companies must take proactive steps to eradicate discrimination based on stereotypes and to make staff aware of the power of social conditioning.
The report explained that stereotypes are incredibly difficult to address because most people are unaware of the extent to which stereotypes influence their thinking and perceptions of others. To break the destructive pattern, researchers recommend that companies adopt objective performance evaluations and succession planning processes, as well as educational programs for managers about stereotyping. It is likewise valuable for companies to showcase the success of women leaders, especially in typical ‘masculine’ fields.
2014: What the Directive Will Really Mean to Women
We mentioned the importance of the new EU Directive standing alongside other measures that address gender inequity at social and educational levels. Yet at the outset, European companies are ready to begin reaping the benefits arising from increased diversification.The presence of more women on boards is likely to have a ripple effect, destroying stereotypes and opening doors for women to be involved in making important financial and investment decisions for their company, privileges which have hitherto been reserved for male board members. At the risk of succumbing to gender generalization, research indicates that men and women have different ways of approaching risk; in the past it was often said that men were more comfortable with high-risk ventures than women. A recent study by the Columbia Business School, however, suggests that both sexes are equally risk-prone – though the situations in which they express this quality varies. Men, it seems, are willing to take more risks in the financial arena, while women take more chances in social situations. Economists define the first step to financial success as taking risks and as one can imagine, the diversification of risk-taking styles in both financial and social contexts can do nothing but benefit European companies as a whole.More women on boards will also go a long way towards correcting erroneous perceptions of their leadership abilities; as they begin to hold positions of power, and grow more confident in their power to inspire and motivate others, they will leverage young women into upper-echelon positions, and, slowly but surely, usher in a new era of change.