The EU at the end of November 2022 adopted a directive implementing gender quotas for the boards of listed companies. By 2026, 40% of non-executive directors or 33% of all directors in listed EU companies employing over 250 workers will have to be women. The fact that it took ten years to be adopted already reveals some of the tension surrounding the topic.
And though this doesn’t affect many companies in Luxembourg--there are less than a dozen matching the description--“if you see that the largest companies have started implementing this, you’ll see that it will filter through to smaller companies,” states Steen Foldberg, managing director of BetterBoard.
Diversity, yes! Quotas, maybe?
That diversity is precious and enriching, isn’t up for debate: a Harvard study in 2018 showed that companies with higher numbers of female board members performed better, and that they helped attract a broader talent pool on all levels--something that Luxembourg could use in the current fight for talent.
“Diversity is a good thing,” says Jean-Paul Olinger, the head of the Luxembourg business union UEL. “It’s important to have boards as diverse as society,” he continues. However, “the question is whether quotas really dissolve discrimination or simply create another type of discrimination.” At the UEL, “we are against imposing quotas and more for implementing incentives and putting in place measures that help balance personal and private life, to improve diversity in companies, to favour the valorisation of competences.”
However, many don’t agree with this line of thinking: Marina Andrieu of WIDE acknowledges that “quotas are a very sensitive subject--in the past, many women would have been against it--but by now, we know that if we don’t have this kind of regulation, nothing significant will happen.”
Foldberg agrees: “I’m not a fan of quotas, but they are necessary.” Early adopters of gender quotas like Norway--which fully implemented corporate board gender quotas in 2008--see a greater diversity, he says. “So, they are working.”
A question of merit and doubt
One of the arguments against quotas is that “the more there are quotas, the more you get to situations where there is a doubt (about a person’s merit),” according to Olinger. The quota could force boards to take on people who might be less qualified as opposed to those who deserved it. “Merit needs to be the first criteria,” he said.
But for Andrieu, “if a woman got the position, it’s because she’s qualified. The idea isn’t to just have a woman sit at the table. Getting a board position is hard, it’s competitive--you need to do interviews, have a big network…so the women who get the position are there because they deserve it--not because they are a woman.”
Standing between the two camps, Foldberg said, “I’m not keen on quotas but I like that they force us to face the issue.” The percentage targets given by the directive aren’t unrealistic--as they don’t require complete equality right away--and therefore solve the issue of “not having the best person in the room.”
Losing out on an educated workforce
In 2021 there were 30.6% of women on the boards of listed companies in non-executive positions in the European Union, and just 22.4% in Luxembourg. In October 2022, this amounted to 21.7%. This despite the fact that women’s level of education is higher than that of men--in 2021, 67.8% of women had a higher education diploma, compared to 57.3% of men, for the 30-34 age group.
There are several issues standing in the way of gender balance on boards. For one, there is tradition: “We have a lot of talented, well-educated women in Luxembourg but there are a lot of women who won’t dare apply for board positions,” says Andrieu. “You always imagine a board member being a man over 50, who held a CEO position in the past, etcetera.”
Career progression is also a key element. “When you look for people to join boards, you tend to look at people who were CEOs and there have been fewer women CEOs, so this limits the pool… I think there needs to be a bigger push to encourage women to be promoted at the C-level,” Foldberg explains.
There is also the lack of self-assurance in women themselves: “Women are often less assured than men. When men think they can do anything, women question their own abilities.” Foldberg continues. For Olinger, what’s important too, is to make sure to give people the space to balance their personal and professional lives--as this would improve chances to grow within a company. Diversity would then occur naturally.
Being an early adopter
While the directive only targets listed companies, it is in private businesses’ interest to invest in diversity in their boards. Not only will the mixed board look more appealing to prospective jobseekers--a non-negligible advantage in a growing talent war--but the variety of perspectives will be enriching for the companies too. For stakeholders and those invested in ESG, showing that you practice what you preach is important too.
“This is the perfect opportunity to reenergise your board and create a board that is much more aware of the current issues of society and more connected,” says Foldberg. But for Andrieu, “men need to open the door to women,” a message echoed in Foldberg’s interview.
“It’s important that companies don’t start too late--they need to start now. They need to put this on the agenda during coming meetings,” underlines Foldberg. Since there aren’t that many available candidates yet, “the sooner you start, the more likely you are going get the most competent candidate and suitable partner for your board.” Pushing women towards higher responsibility roles will over time also increase that pool of candidates.
“There is no fast solution,” as Olinger puts it but quota or not, the nomination process for board members needs to be more neutral and transparent, so as to encourage women to apply. As Foldberg says: “At the end of the day, if you’re not trying to develop 50% of your talent mass, you’re losing out. At all levels.”