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Symposium 2012

Implementing Board Diversity

The Challenge

In the wake of the global crisis, there is clear momentum towards changing the way that business is conducted—whether in the form of increased regulations, greater accountability or changing corporate leadership. Such initiatives include changing the composition of corporate boards to include more women. What progress has been made on these initiatives and what would make them more effective?

Europe has taken the lead in refreshing boards of directors by bringing the voices, perspectives and ideas of women to guide its companies in an increasingly competitive global economy. It is doing so in the middle of its own financial crisis, which suggests that when the region emerges from this period, it will have a new cadre of board directors who were not there before in significant numbers. How they affect companies' performance remains to be seen.

The most aggressive strategy is government-led through mandated quotas of 30–40% of board seats to be held by women in publicly traded and/or state-owned companies. What Norway began in 2003 with its insistence that women comprise 40% of the boards of listed companies has resulted in the strategy being adopted by Spain, Iceland, France, Belgium, Italy and the Netherlands. Outside Europe, Malaysia has issued an executive order for 30% of board appointments to be female—the first country in the Asia Pacific region to do so. In Latin America, now Brazil has proposed a quota of 40% for state-owned companies from 2012, which generate 38% of the country's GDP.

Have these quotas been effective? A 2012 report by Corporate Women Directors International on where women are on the boards of the world's 200 largest companies showed that companies based in countries with quotas had a higher percentage of female directors (16.1%) than the 13.2% average representation in peer companies. France showed the most dramatic increase from its prequota 6.4% female board representation to its postquota 23.7% women directors in 2012. But other countries have moved far more slowly.

Not all quota laws are the same: for example, none compare with the strong sanctions that Norway introduced nor its strict deadlines for implementation. What can governments do to encourage compliance with these mandates? Which government agency should be responsible for oversight and are governments willing to allocate those resources, especially in difficult economic times?

Beyond quotas, there are private sector initiatives to improve the percentage of female directors by incorporating board diversity (and in some instances, gender diversity) into a country's code of corporate governance. Sixteen countries have recently adopted such measures, primarily European but also including Kenya, Nigeria, Morocco and Malawi. Some have been instituted to get ahead of quotas or to parallel those already in place.

The question again is how effective are these "soft" measures? Finland, which was the first country to adopt this strategy in 2003 and then specifically required gender diversity in 2008, has seen remarkable progress in the percentage of female directors, which has increased from 12% to 22% since 2008. Members of the Finnish corporate governance commission are proud to point to the fact that they arrived at this increase without a quota.

Another private sector initiative is driven by stock exchanges in Australia and Poland (and recently proposed by the Hong Kong Stock Exchange): to have board diversity as a listing requirement. Australia's approach is the most aggressive in its requirement that member companies disclose the percentages of board directors, senior management and employees who are female and their plans for improving those numbers. Has this been effective? Apparently so: in the past two years, Australia increased its percentage of female directors from 8.3% to 15.2%.

As heartening as these efforts are, the question is how can these initiatives become sustainable? Will companies do the hard work of creating a corporate culture that creates a pipeline for women to senior leadership roles? What internal policies need to be instituted for women to rise to the top of companies so as to provide new perspectives and experiences?

    Solutions

    Solution
    Symposium 2012

    Strict deadlines for compliance and enforced sanctions for noncompliance with quota laws must be in place for board diversity laws to be effective.

    Strict deadlines for compliance and enforced sanctions for noncompliance with quota laws must be in place for board diversity laws to be effective.

    Strict deadlines for compliance and enforced sanctions for noncompliance with quota laws must be in place for board diversity laws to be effective.

    Polity, Business
    Solution
    Symposium 2012

    Engage male corporate leaders in actively increasing the number of women directors.

    Engage male corporate leaders in actively increasing the number of women directors.

    Engage male corporate leaders in actively increasing the number of women directors.

    Business
    Solution
    Symposium 2012

    Multilateral investment banks, government development banks and pension funds should bind their equity stakes to contractual clauses ensuring minimal gender equity on the boards of companies in which they invest.

    Multilateral investment banks, government development banks and pension funds should bind their equity stakes to contractual clauses ensuring minimal gender equity on the boards of companies in which ...

    Multilateral investment banks, government development banks and pension funds should bind their equity stakes to contractual clauses ensuring minimal gender equity on the boards of companies in which they invest.

    Business
    Solution
    Symposium 2012

    Companies must work proactively to create internal policies and programs that enable women to rise to leadership roles.

    Companies must work proactively to create internal policies and programs that enable women to rise to leadership roles.

    Companies must work proactively to create internal policies and programs that enable women to rise to leadership roles.

    Business

    Proposals

    Proposal
    Symposium 2012

    Orchestrating Impartiality

    Slow progress in the Corporate world of Women Directors participation and talent gender diversity inclusion, is still a matter of discussion all over the world and currently a controversial debate is ...

    Slow progress in the Corporate world of Women Directors participation and talent gender diversity inclusion, is still a matter of discussion all over the world and currently a controversial debate is taking place at the European Union.1 There have been several examples of different models of enforcement and adoption measures in Europe from 2003 to date, via binding laws, recommendations and non-binding voluntary progress models, with a clearer improvement and acceleration towards equality when a law of quotas is enforced, with sanctions and time deadlines. European Commission thought and hoped that a nonbinding commitment would work but the 2011 progress

    Polity, Business
    Proposal
    Symposium 2012

    Creation of voluntary actions to promote MNCT (mentoring, networking, coaching and training) to insert women in boardrooms

    Create incentives for agreements between institutions (public, private and non-profit organizations) in order to promote mentoring, networking, coaching and training (if and when needed) involving wom ...

    Create incentives for agreements between institutions (public, private and non-profit organizations) in order to promote mentoring, networking, coaching and training (if and when needed) involving women to provide all the necessary tools for their insertion on the boards. The inequality in the number of women comparing with the number of men on boards is partly a result of gender discrimination. Research has shown that the inclusion of only one woman on the board is able to break paradigms and potential prejudices, creating a potentially contagious effect to insert new women on boards of directors. Even if there is no gender

    Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Promoting changes in the dynamics of family child care through suitable periods of paternity leave.

    Enact a law in order to extend the period of paternity leave to encourage paternal involvement in the tasks of creating and raising children, especially in the period immediately after the birth of th ...

    Enact a law in order to extend the period of paternity leave to encourage paternal involvement in the tasks of creating and raising children, especially in the period immediately after the birth of the child. The notion that raising children is almost an exclusive responsibility of women prevails in most contemporary societies. In this perspective, it is difficult to find place for greater paternal participation and responsibility in baby care. This kind of thinking is reflected in the legislation establishing the periods of paternity leave in certain countries: according to the International Labor Organization (ILO), the shorter periods of paternity

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Implementation of a suitable infrastructure in large private companies where parents could leave their children during workday.

    Enact a legislation requiring large private companies to create a daycare infrastructure so that mothers do not have to give up their career to care for children. The cultural reality of most contempo ...

    Enact a legislation requiring large private companies to create a daycare infrastructure so that mothers do not have to give up their career to care for children. The cultural reality of most contemporary societies imposes the woman all the burden of care and upbringing of children from birth. Given this situation, it is necessary to develop measures to ensure that women could be able to reconcile the responsibilities of motherhood with professional tasks. One of these measures to effectively promote a balance between family life and professional career is the creation of an infrastructure within large companies to provide the

    Polity, Academia, Business
    Proposal
    Symposium 2012

    Implementation of affirmative action determining a minimum participation of both genders in the boards of State-Owned Enterprises (SOEs).

    The State should take affirmative action to promote gender diversity on the boards (eg. minimum 1/3 of each gender) of SOEs (companies controlled or owned entirely by Federation or State-members) in o ...

    The State should take affirmative action to promote gender diversity on the boards (eg. minimum 1/3 of each gender) of SOEs (companies controlled or owned entirely by Federation or State-members) in order to set an example and encourage the private sector to do the same. The solution constitutes an affirmative action which establishes that boards of SOEs must be formed by 1/3 of each gender. This solution must take place when, at the end of each term of a male director, the substitute must be a woman until the established minimum percentage is reached. To avoid cases of noncompliance, if

    Polity, Academia, Business
    Proposal
    Symposium 2012

    Equity stakes of Development Banks conditional on gender diversity.

    Multilateral Development Banks and State level Development Banks should bind their equity stakes to contractual clauses that ensure minimal gender diversity on the boards of their investee companies. ...

    Multilateral Development Banks and State level Development Banks should bind their equity stakes to contractual clauses that ensure minimal gender diversity on the boards of their investee companies. Multilateral Development Banks (e.g. IFC / World Bank) and State level Development Banks (e.g. BNDESPar / BNDES in Brazil) are relevant shareholders of thousands of companies worldwide. These investments are carried out directly or through private equity funds in both publicly-held and privately-held companies. As evidence of the importance of the equity interest of these agents, the IFC has allocated about $ 2 billion in shareholdings of 132 companies in 2011, while

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Loans from Development Banks with favorable terms for companies committed with greater gender diversity on their boards.

    Multilateral Development Banks and State level Development Banks should create programs that provide loans with advantageous terms to companies committed with greater gender diversity on their boards. ...

    Multilateral Development Banks and State level Development Banks should create programs that provide loans with advantageous terms to companies committed with greater gender diversity on their boards. Multilateral Development Banks (e.g. IFC / World Bank, IADB) and State level Development Banks (e.g. BNDES in Brazil) are relevant creditors of thousands of companies worldwide. As evidence of the importance of the role of these agents, the IFC has disbursed about $ 5 billion in loans to 182 companies in 2011, while in the same period the BNDES has disbursed about $ 140 billion ($ 70 billion), including hundreds of large loans

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Incentives for gender diversity by institutional investors funded by Governments in their role as shareholders.

    Institutional Investors financed by Governments (e.g. Sovereign Wealth Funds, Public Pension Funds or Pension Funds of State-Owned Enterprises, etc.) should create objective criteria in their investme ...

    Institutional Investors financed by Governments (e.g. Sovereign Wealth Funds, Public Pension Funds or Pension Funds of State-Owned Enterprises, etc.) should create objective criteria in their investment processes in order to positively differentiate companies committed with greater board gender diversity. Institutional Investors financed by Governments, particularly sovereign wealth funds and pension funds of state-owned enterprises are relevant shareholders of thousands of companies worldwide. It is estimated that, by the end of 2011, assets under management of sovereign wealth funds have reached $ 4.8 trillion, while the 300 largest pension funds had about $ 6 trillion under management. Given that the resources

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Including diversity as a principle to guide the process of appointment of executives on boards in the corporate law.

    Including in the corporate law a principle that guides the appointment of directors to the board based on the diversity, in order to improve the management and corporate governance of the companies. T ...

    Including in the corporate law a principle that guides the appointment of directors to the board based on the diversity, in order to improve the management and corporate governance of the companies. The inclusion of diversity in corporate law as element to be considered in the process of appointment of directors has a rational based on principles. First of all, reinsuring principles in written law strengthen their application. Ultimately, those principles serve the special task of guiding judges on their decision making on corporate conflicts. Therefore the importance of the solution lies also on forming leading cases on the subject.

    Polity, Academia, Business
    Proposal
    Symposium 2012

    Gender diversity on boards of directors as a requirement for celebrating public contracts.

    Legislation that will establish a minimum percentage of both genders in boards as a qualification requisite for participation in public tender.   Economic Rationale The relevance of the proposal esta ...

    Legislation that will establish a minimum percentage of both genders in boards as a qualification requisite for participation in public tender.   Economic Rationale The relevance of the proposal establishing minimum representation of both genders in boards as a requisite qualification for participation in public tender (procedure for public contracting or public biding) lies in the volume of resources involved in this type of contracting around the world. It is worth mentioning that the State must provide the country infrastructure such as the fundamental facilities and systems serving a city or area (transportation and communication systems, power plants, and schools)

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Disclosure rules about diversity in the composition of the workforce and senior management positions.

    Proposal for promoting diversity and transparency through rules enacted by capital market regulators requiring a company to disclose whether and how diversity is a factor in considering candidates for ...

    Proposal for promoting diversity and transparency through rules enacted by capital market regulators requiring a company to disclose whether and how diversity is a factor in considering candidates for staff, senior management and boards.   International experience For the first time, the SEC (U.S. Securities Exchange Commission) adopted a rule to assess a company’s commitment to developing and maintaining a board based on the diversity of its members (December 2009). Such rule demands that the company must disclose specifically three points: a) if diversity is a factor considered for nomination to the board of directors, b) how diversity is considered

    Polity, Academia, Business
    Proposal
    Symposium 2012

    Engage CEOs and senior leaders by forming small peer groups of “Champions of Change” which commit to working together to increase the representation of women in leadership

    The challenge: Over the last few years, we have seen a growing recognition of the importance of including more women in decision-making roles and of the benefits gained by society and business in doin ...

    The challenge: Over the last few years, we have seen a growing recognition of the importance of including more women in decision-making roles and of the benefits gained by society and business in doing so.  In Australia, if you go back 5 years, we were starting from a low base, with less than 9% of board seats of our top companies held by women.  Smaller companies (beyond the top 200) were viewed as a virtual “women free zone.”  Worse than the modest starting place, there had been no progress in more than 5 years. It became clear to many of

    Business