The EU commission has announced that it has dropped plans to introduce mandatory quotas for the number of women on company boards following heavy criticism from member states, orchestrated by Britain.

Instead of imposing a 40% quota, which the original proposals had stated, the latest draft encourages companies to aim for that level of representation, but leaves national Governments to decide whether to enforce the rules by inflicting sanctions.

It has been suggested that the new proposals have been ‘watered down’; however Viviane Reding has disputed these claims and called the proposals “a breakthrough initiative”.

It has been revealed that the new proposed legislation, spearheaded by Viviane Reding, includes:

* Making the 40% objective an obligation to put procedures in place to try to achieve 40%, rather than an obligation to get to 40%; and
* companies would not face sanctions for simply missing the target and would only be punished if they missed the objective and had no procedures in place to try to meet it.

UK Business Secretary, Vice Cable has applauded the decision to drop the plans for mandatory quotas, saying:

“The UK welcomes the Commission’s decision not to impose mandatory quotas for women on boards.

“We remain fully committed to increasing women’s representation in UK boardrooms, but along with like-minded member states, we have consistently argued that measures are best considered at national level.”

In response to the announcement, Jemima Coleman, who chaired the Employment Lawyers Association working party which responded to the EC consultation on gender equality on corporate boards, said:

“This would be a welcome development. Much progress has been made in the UK to address the gender imbalance on corporate boards through business-led voluntary initiatives following the Davies women in boards reports. Many British businesses and women themselves opposed the imposition of quotas; these can undermine the merit-based appointment process and the effectiveness of the women appointed.

“The key to success will be to tackle poor female retention rates within an organisation to ensure that women can be retained in the workplace at a level commensurate with their skills and experience. It is hoped that the new parental and flexible leave measures recently announced by the Government will provide parents with more flexibility and choice in relation to childcare and that this, in turn, may help more women to succeed in the workplace.”

With an opposing view to the decision, Fiona Hotston Moore, Partner at London accountancy firm Reeves, and a campaigner for enforceable quotas, commented:

“The quota proposals are very weak and fall disappointingly short of what is needed to redress bias against women. They only apply to non-executive directors and will encourage more tokenism. We need mandatory quotas for a fixed period of time to get the balance right.

“For the UK Government to argue that the number of women on boards here has risen thanks to the voluntary approach completely misses the point.

“If those women are sitting there as non-executive directors with as much actual decision making responsibility as a vase of flowers, that is hardly progress. What we need to see is more women in top management roles, and that is simply not happening.

“In fact, the number of women in executive roles in FTSE 100 companies is just 6.6%, a rise of just over 1% since the report from Lord Davies 18 month ago.

“Bias, both conscious and unconscious, remains in the boardroom and in recruitment firms. Quotas are not discriminatory – they correct existing discrimination so allowing strong women candidates to get a fair crack at top appointments. Diverse boards will increase shareholder value and help build a stronger economy.”

She concluded:

“If the EU commission believes intentions are going to be enough to trump embedded prejudices, I fear that they are going to be as let down as all of us are who have seen what little real progress the intentions of Lord Davies have actually achieved.”