ACCA - The global body for professional accountants
We support the goal of increasing the number of women on company boards, but this aim must be pursued for the right reasons, namely to enhance the ability of company boards to make sound business decisions on behalf of their stakeholders
—John Davies, head of technical, ACCA

Full self-regulation has not been successful in increasing the proportion of women on company boards, so some additional regulatory incentive for companies to recruit more suitable female candidates is needed. Yet the ultimate aim of any new policy initiative must be for boards of directors to become more effective as units, not to require companies to appoint individuals to their boards simply to achieve targets - argues ACCA (the Association of Chartered Certified Accountants) in its response to Commissioner Reding’s public consultation published early March addressing chronically low female representation on corporate boards

For the global accountancy body, the fact that at present only three per cent of chief executives in the largest European companies are women underlines that companies are not drawing from the full pool of skills available.

However, while some countries have achieved increases by resorting to legal quotas, a 'one size fits all' for Europe cannot work given the specificities of each EU member states. A more sustainable approach based on subsidiarity, involving encouragement rather than rigid rules is the better option. The UK experience shows for example that improvements in the comply or explain-based corporate governance code has already led to a significant increase in the number of women directors appointed to listed companies. 

John Davies explains: 'We support the goal of increasing the number of women on company boards, but this aim must be pursued for the right reasons, namely to enhance the ability of company boards to make sound business decisions on behalf of their stakeholders. Given the limited influence that shareholder bodies generally tend to have with company boards, it is appropriate there be some authoritative encouragement issued to companies to recognise the potential business and governance benefits of appointing more female board members. We would agree that, without some measure of this kind, the desired improvements are not likely to materialise. However, any new encouragement should avoid imposing rigid requirements, either legal or regulatory, which could have the effect of undermining the ability of boards to assemble a group of people of complementary skills and experience. 

'Ultimately, the issue of women directors should be addressed in a wider context of enhancing board diversity more generally, one which encourages companies to consider the potential business and governance benefits of recruiting directors from all and any backgrounds and of achieving a sustainable balance of skills, experience and perspectives' John Davies adds.

John Davies continues: 'We believe that if action has to be taken at EU level, it should take the form of a recommendation to member states, rather than binding EU legislation. This would leave member states free to decide what is the best mechanism to pursue the aim of increasing the number of women on boards and how national regulatory intervention should be framed. Of course, these mechanisms  should be accompanied by a requirement for companies to report to their shareholders on their progress in achieving a ‘balanced’ board and backed up by active monitoring by investor groups and market authorities, and governments should keep the matter under review.' 

Another point that should be addressed in any future regulatory initiative is the representation of women in senior management positions below board level. ACCA believes companies should be encouraged to give express consideration to this matter and to take action to respond to any internal gender imbalance that may exist.

'The issue of gender imbalance on boards cannot be addressed solely by setting targets for external appointments, there must also be a commitment on the part of companies to develop talent in-house, and to resolve any structural obstacles to female career advancement. In light of this, ACCA is looking forward to participate in the new European Commission initiative called ‘Equality pays off – supporting companies across Europe to successfully master future challenges’, whose goal is to highlight the business case for better tapping the labour force potential of women and support companies in successfully accessing this potential and winning top talent,' John Davies concludes.