Rethinking gender quotas on corporate boards – meer.com

Analysis of the EU ‘Women on Boards’ Directive and its Alignment with Sustainable Development Goals

Introduction: Legislative Action for SDG 5

A report on the European Commission’s “Women on Boards” directive, which addresses gender imbalance in corporate leadership. This analysis examines the directive’s objectives, potential impacts, and criticisms through the lens of the United Nations Sustainable Development Goals (SDGs), primarily focusing on SDG 5 (Gender Equality), SDG 8 (Decent Work and Economic Growth), and SDG 10 (Reduced Inequalities).

Directive Mandates and Direct Contribution to SDG 5

The directive is a legislative instrument designed to accelerate progress towards SDG 5, which calls for ensuring women’s full and effective participation and equal opportunities for leadership in economic life.

1. Primary Objective: To increase the representation of the underrepresented sex on the boards of listed companies within the European Union.
2. Specific Targets: By 2026, companies must meet one of two quotas:
   • A minimum of 40% of non-executive director positions.
   • A minimum of 33% of all director positions (executive and non-executive).
3. Enforcement: Companies failing to meet these targets must implement transparent and gender-neutral selection processes to rectify the imbalance.

Progress towards this goal has been observed, with female representation on EU corporate boards increasing from 13.7% in 2012 to 30.6% at present. This trend demonstrates a positive trajectory towards achieving SDG Target 5.5.

Challenges and Considerations for SDG Attainment

While the directive aligns with the ambitions of SDG 5, its reliance on a quota system raises concerns regarding its overall effectiveness and potential to inadvertently conflict with other sustainable development principles.

Critique of Mandatory Quotas

• Effectiveness in Question: Data from the 2019 European Women on Boards Gender Diversity Index indicates that legislative quotas do not guarantee superior outcomes. Countries without mandatory quotas (e.g., Sweden, UK) have demonstrated high gender diversity, while some with quotas (e.g., Germany, Spain) have scored lower, suggesting that cultural shifts may be a more potent driver of change.
• Undermining Meritocracy (SDG 8): A significant concern is that quotas may foster the perception that women are appointed to fulfill a mandate rather than on merit. This can undermine the principle of productive employment central to SDG 8 and place undue scrutiny on female leaders, forcing them to work harder to prove their qualifications.
• Risk of Increased Division (SDG 10 & 16): By making gender a factor in selection, the policy risks creating resentment among male candidates who feel overlooked. This could create new social divisions, running counter to the goals of SDG 10 (Reduced Inequalities) and SDG 16 (Peace, Justice and Strong Institutions), which promote inclusive societies.
• Impact on Corporate Autonomy: Increased government intervention may limit the ability of corporations to act on their best judgment, innovate, and take full responsibility for their diversity and inclusion strategies, which are integral to sustainable economic growth (SDG 8).

Alternative Pathways to Sustainable Gender Equality

Achieving the targets of SDG 5 in corporate governance may require a multi-faceted approach that complements or replaces legislative mandates.

• Focus on Removing Systemic Barriers: The priority should be on dismantling the cultural and structural barriers that have historically impeded women’s advancement, ensuring a level playing field for all.
• Promoting a Culture of Meritocracy: Fostering an environment where the most qualified individual is selected for a position, irrespective of gender, is fundamental to achieving both gender equality (SDG 5) and decent work (SDG 8).
• Acknowledging Organic Progress: The natural progression of a better-educated and qualified female workforce is already leading to increased representation in decision-making roles. This organic cultural shift should be supported and accelerated through non-prescriptive means.

Conclusion

The “Women on Boards” directive represents a direct attempt to legislate progress on SDG 5. However, a comprehensive strategy for sustainable development must consider the potential for such measures to create unintended negative consequences that affect the principles of merit, inclusion, and economic freedom central to SDGs 8, 10, and 16. A balanced approach that combines the removal of artificial barriers with the promotion of a meritocratic culture is essential for achieving genuine and sustainable gender equality in corporate leadership.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 5: Gender Equality

  This is the primary SDG addressed. The article’s central theme is the underrepresentation of women on European company boards and the legislative efforts, such as the “Women on Boards” directive, to achieve gender-balanced representation in corporate decision-making roles.

• SDG 8: Decent Work and Economic Growth

  The article connects to this goal by discussing employment practices, meritocracy, and equal opportunities for high-level corporate positions. The debate over whether quotas or cultural shifts are better for achieving balanced representation touches upon the principles of fair and productive employment for all.

• SDG 10: Reduced Inequalities

  This goal is relevant as the article focuses on reducing the specific inequality between men and women in access to leadership positions within the economic sphere. The EU directive is a policy measure aimed directly at reducing this form of gender-based inequality in corporate governance.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 5.5: Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic and public life.

   The article directly addresses this target by focusing on the proportion of women in “non-executive director positions” and “executive and non-executive director positions” on the boards of listed companies. The entire discussion revolves around strategies to increase women’s participation in these key economic decision-making bodies.

2. Target 10.2: By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status.

   The EU’s “Women on Boards” directive is a clear example of a policy intended to promote the economic inclusion of women, who are identified as the “underrepresented sex” in corporate leadership. The article analyzes this policy as a tool to overcome barriers to inclusion.

3. Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men… and equal pay for work of equal value.

   While the article does not discuss pay, it extensively debates the principle of equal opportunity for employment and advancement. The argument for a “culture of meritocracy in which the best person for the job is the person that gets it” directly relates to ensuring that selection processes for high-level positions are fair and provide equal opportunities for all genders.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Proportion of women on corporate boards: This is the main indicator used throughout the article to measure progress. Specific data points are provided:
  • The EU directive’s target metric: “at least 40% of non-executive director positions or 33% of both executive and non-executive director positions to be held by members of the underrepresented sex by 2026.”
  • Historical progress in the EU: An increase “from 13.7% to 30.6%” between 2012 and the present.
  • A national benchmark: Norway had “an average of over 30% of corporate boards being women” even before implementing a quota.
• Existence of mandatory quotas or legislation: The article uses the presence or absence of mandatory quotas as an indicator of policy action. It compares countries with and without quotas (e.g., Sweden and the UK without quotas, Germany and Spain with quotas) to analyze the effectiveness of legislative intervention.
• Gender Diversity Index (GDI) scores: The article explicitly mentions the “2019 European Women on Boards Gender Diversity Index” and its GDI scores as a composite indicator used to rank and compare the performance of different countries in achieving gender balance on boards.

4. SDGs, Targets, and Indicators Table

Source: meer.com