There are many problems facing stockmarkets right now. Returns for investors are miserable, with most major markets languishing below their levels of a decade ago. Companies are rarely bothering to list any more. Chief executives take an ever bigger share of the spoils, leaving less and less on the table for shareholders. In many ways, the stockmarket as a vehicle for bringing together people with spare capital and people with ideas for how to invest it productively, looks broken.
And what fix do the regulators come up with? Apparently the real issue that needs to be addressed is how we can get more women onto the boards of public companies. But this isn’t an issue at all.
This week, the European Union launched tough new targets that may well lead to mandatory quotas for female directors. The European Union’s justice chief Viviane Reding put out a report condemning the lack of progress European companies have made on getting more women onto their boards. She is even threatening to introduce legislation across the 27 member nations of the EU that would stipulate the minimum number of women a board must have.
Many European countries already have quotas. Spain wants women to comprise 40% of large company boards by 2015, and France passed a law last year to impose a 20% quota by 2014, and 40% by 2017, for companies with at least 500 employees and annual sales of €50m. Norway set a quota for at least 40% of corporate board seats to be filled by women in 2003.
In this country, David Cameron has latched onto the issue and has been pushing for more and more women on boards. So don’t be surprised to see mandatory EU-wide quotas at some time in the next few years. But is that really necessary?
As I see it, there are three big problems with quotas. First, they lead to a whole cadre of professional quota-filling women being appointed to the same boards. In Norway these women came to be known as the ‘golden skirts’: a small group of very well-paid senior women who the head-hunters called for time and time again.
But there is very little evidence that this increased the numbers of women being promoted through the ranks – it was mostly non-executives being rounded up in order to tick another box on the corporate governance checklist. Encouraging more tokenism and lip service is hardly the way to change the culture of big companies.
And that’s assuming a culture change is even necessary. It’s true to say that women are not as well represented as they should be at board level. Only 12% of FTSE 100 directors are female. That’s a lot less than their fair share, given that women make up half the population, and almost the same percentage of the workforce.
But it is a mistake to focus solely on a handful of top jobs. What counts is how the broad mass of female workers are doing – not just a few well-paid women right at the top of the tree. And the news on that front – while far from perfect – is certainly not awful enough to justify mandatory quotas.
Already, more women than men go to university. That doesn’t necessarily lead to a better income later in life, but not many people have a great career these days without a degree of some sort. And the pay gap – while still significant – is now at its narrowest since records began, according to the latest data from the Office for National Statistics.
Figures show that the pay gap between men and women in full-time employment fell to 9.1% in 2011, from 10% in 2010. While among the over-40s, men are still significantly better paid, with a gap of around 20% or more, the situation seems to be improving among younger workers.
Indeed, among 22- to 29-year-olds across the whole economy, female staff now earn on average more than their male counterparts. Arguably, if any group within society needs special help, it is low-skilled men, who are increasingly unemployable.
Finally, quotas distract us from the real issues. As Professor John Kay’s interim report on the state of the stockmarket made clear this month, there are plenty of important questions about how the stockmarket works right now. Few companies see the point of a listing, preferring to raise money privately if they can.
After a decade of miserable returns investors are giving up. Executive pay seems to be spiralling out of control, even as returns to the actual owners of the company get ever more miserable. Fund managers and analysts seem more and more focused on quarterly profit targets rather than the long-term strategic direction of the business.
These are all real issues, which require real solutions. But women on boards? It is a bogus problem. No one is suggesting that women perform worse as directors. However, no one is really suggesting that they do any better either. Setting quotas and targets just distracts attention from the real issues. Worse, it threatens to introduce yet more of the meddlesome regulation – this time from the EU – that is keeping more and more companies away from the stockmarket.