Views on improving the integrity of global capital markets
10 March 2011

EU: More Women on Boards

Have you noticed that women are typically under-represented in the boardrooms? Well, at least this is the case in Europe, where just one in 10 board members at Europe’s biggest companies are women and, in 97% of cases, the board is chaired by a man. The European Union is working hard to change this situation, as its recent report on gender equality and business leadership indicates that businesses with more women at the top outperform “men-only” companies by posting a higher operating income. What’s more, there are a number of strong links between gender balance and performance in creativity, innovation, financial reporting, auditing, and internal controls — in other words, improved corporate governance, which is why CFA Institute is so interested in these developments.

The European Commission is therefore calling on all listed companies in Europe to sign a “Women on the Board Pledge for Europe” (PDF) by March 2012, by which they would “pledge to reach the target of 30% female board members by 2015 and 40% by 2020 by actively recruiting qualified women to replace outgoing male board members.” The EU is indicating that it will closely monitor the progress over the next 12 months and, should this self-regulation fail, is prepared to “take further action at EU level” — read: regulate.

Belgium is already strongly going in that direction, as it has proposed a new bill on female board representation, which would require that by 2017 no less than one-third of board members be female — the bill still must be passed by the Chamber and the Senate. Meanwhile, in the United States, there is no requirement for issuers to have female representation on their boards. Within the S&P 500 index, 89% of companies have at least one female director, while women account for 16% of total directorships, according to Institutional Shareholders Services.

CFA Institute is highly interested in the subject, as the past decade of business around the world has highlighted the role that good corporate-governance practices play in maintaining viable entities and safeguarding investors’ interests, which is at the core of the CFA Institute mission. Its second edition of the Corporate Governance of Listed Companies (PDF) is a great tool for investors to promote stronger corporate governance in the companies in which they own shares, notably by ensuring the independence and qualification of board members. Shareowners Rights across the Markets is another useful tool for savvy investors with shares in companies around the world and who want to know more about their rights in one particular country.

By the way, this past Tuesday 8 March was the 100th International Women’s Day. Obviously, much progress has been made since 1910, but who would disagree that there is much more to do to make a 150th or 200th anniversary pointless, when women represent 59% of university graduates but only 12% of board members at Europe’s largest companies? And this is just talking about Europe….

And a last word: the person who suggested to me to write a blog post on this topic is … a man.

About the Author(s)
Agnès Le Thiec, CFA

Agnès Le Thiec, CFA, is a former director of capital markets policy at CFA Institute in Brussels.

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