David Cameron’s Ultimatum: Promote More Women To Boards Or Face Quotas

British Prime Minister David Cameron has an ultimatum for major companies in England. These firms will face quotas unless they promote more women to board level, he warned. “The case is overwhelming that companies are run better if we have men and women alongside each other. If we can’t get there in other ways I think we have to have quotas…Women now make up nearly half the workforce across Europe and the majority of university degrees, but they are still not sufficiently represented at the senior boardroom level. The evidence is that there is a positive link between women in leadership and business performance, so if we fail to unlock the potential of women in the labor market, we’re not only failing those individuals, we’re failing our whole economy,” he said in a statement at the Northern Future Forum summit in Stockholm, attended by countries outside the Eurozone. It is great to hear that the Prime Minister is supportive of more women being in top positions at companies, but companies in England have not responded to other initiatives to do this so this means quotas could even be more of a reality.

The U.K. is working to implement the recommendations of a February 2011 report by Mervyn Davies on increasing the number of women on boards, it said in a submission to the meeting. As a result, women now make up 15% of directors of companies in the benchmark FTSE 100 Index, up from 12.5% last year, and there are now only 10 all-male boards in the FTSE, down from 21 last year. Starting in October, as a result of a new provision in the U.K. corporate-governance code, companies will have to report on their policy for boardroom diversity and how they are making progress in delivering it.

Cameron said he would like to boost numbers “preferably without having quotas” but said he would not rule them out “if we cannot get there by other means”. He cited the advancements women in Sweden and Norway have made where quotas have been in place for a few years. He told the meeting of eight other European leaders that the “case is overwhelming that companies and countries run better if you have men and women working together at the top…So I want to get ideas in Stockholm that we can take back to London to explore if they could help us get more women into British boardrooms, boosting profits and contributing to the economic growth we all urgently need.”

The other goal of the meeting was to focus on promoting female entrepreneurs in England. In November, Equalities Minister Theresa May announced in her initiative speech at the Royal Commonwealth Club that the government would be recruiting about 5,000 business ministers to guide and inspire female entrepreneurs. The British government planned to provide resources for 5,000 mentors to be trained to help women set up their own businesses, in addition to the government’s ongoing work to boost flexible working and improve the parental leave system. If women entrepreneurs in the U.K. were as successful as those in the U.S., there would be an extra 600,000 women-owned businesses contributing 42 billion pounds ($66 billion) to the economy, according to the U.K.’s submission, which was published on the forum’s website.

Quotas are not the answer to get women in the boardroom. Though France, Norway and Spain have improved equality in the boardroom on paper it doesn’t mean the company is a better place. Quotas undermine women because it is saying they can’t get there on their own merit. A University of Michigan study of the effects in Norway found that the law led to inexperienced women joining the boards, “and that this has seriously damaged those firms’ performance.” As Leonie Lamont of The Sydney Morning Herald wrote, ”For in the upper echelons of business, the ”Q” word provokes revulsion. Quotas bring sanctions. Quotas are tokenistic. Quotas undermine the mythical purity of the market. Quotas put the government’s nose where it doesn’t belong.” She was writing about Australia’s Equal Opportunity for Women in the Workplace Agency business achievement awards and she noted that the recipients will not have been driven by legislated quotas. “They are forward thinkers, putting in place measures to get the maximum potential from the human capital at their disposal.” And that should be how more women get in the boardroom.

Theresa May said recently: “The best way to get change is to do it in a way which isn’t imposing a quota on a company but is encouraging people to recognize the talents within those companies.” She said the government was monitoring progress made since the Davies’ report was published last year and would “work with companies to encourage them to use the talent within them”.