The European Union’s plans to enforce gender diversity quotas on boards are advancing, with calls in the European Parliament for EU-wide legislation to be put in place ensuring minimum female representation of at least 40% on supervisory boards by 2020.

There is a general acceptance that if member states/companies do not move to a more diverse board structure voluntarily, European legislators will enforce quotas in order to increase the pace of change and ensure greater female representation in listed companies across Europe. Why is that?

  1. There is mounting socio-political pressure in Europe to appoint more people from chronically under-represented populations, notably women and ethnic minorities, to reflect better the demographics of the company’s own customers and employees. Diversity is critical to the success of every firm exposed to the forces of economic globalisation.
  2. The ever-increasing complexity of the issues discussed at board level, requiring boards to appoint more individuals with specialized and/or issue-specific expertise. A diverse team of highly qualified people with different backgrounds, specialties, and forms of expertise is needed to help solve more global and sophisticated problems.
  3. The recent financial crisis saw a number of prestigious (but relatively homogeneous) Boards fail to weather the storm. Greater Board diversity, in this respect, is being presented as part of the solution to improve corporate governance.
  4. More generally, gender diversity is increasingly accepted as a good thing since a number of surveys have indicated that there is a positive correlation between greater female representation on company boards and company (share price) performance. Simply put, Board diversity is a driver of high and sustainable performance.

So if there is mounting evidence that company Boards today need to become more diverse - demographically, but also in terms of the backgrounds, competencies and interests of their members – I would argue that building diversity is also a new business imperative for every executive confronted with the daily tasks of managing projects, leading people and achieving results.


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