LIU, Alm.del - 2011-12 - Bilag 55: Regeringens besvarelse af EU Kommissionens høring: Gender Imbalance in corporate boards in the EU, fra minister for ligestilling og kirke

European CommissionDG Justice / D1LX 46 - 1/101'Consultation gender balance'B-1049 BrusselsBELGIUM[email protected]Consultation document:Gender imbalance in corporate boards in the EUThe Danish Government welcomes the opportunity to respond to the Euro-pean Commissions consultation on Gender Diversity.The Danish Government is convinced that more women in top managementpositions and on corporate boards are needed for the benefit of society andthe individual – all managerial talent, qualifications, and skills should bebrought into play.Within the last ten years, the number of female top executives in the privatesector in Denmark has risen from four percent to seven percent, and the sametrend prevails regarding women on corporate boards. Today, women makeup twelve percent of all board members in private companies listed on theDanish Stock Exchange.Women continue to attain higher levels of education and qualifications.However, the process of achieving a more equal gender balance in manage-ment positions and on boards is progressing slowly. Therefore the DanishGovernment agrees with the European Commission that actions to improvethe gender balance in corporate boards are needed.However, the gender imbalance on corporate boards cannot be solved onlyby focusing on board representation. The Danish government is convincedthat efforts should also be devoted to increase the recruitment base of candi-dates. Hence, it must be ensured that potential candidates develop relevantqualifications.The following answers reflect the Danish Government’s view on how to im-prove gender balance in corporate boards.

Corporate Governance recommendationsIn August 2011 the Committee on Corporate Governance in Denmark re-vised their recommendations on Corporate Governance. In the new recom-mendation the Committee recommends that the supreme governing body an-nually discuss the company's activities to ensure diversity at managementlevels, including equal opportunities for both genders. The Committee alsorecommends that the supreme governing body must setmeasurable objec-tivesin the management commentary in the annual report and/or on the com-pany's website give an account of both the objectives and the progress madein achieving the objective.The Committee’s recommendations are aimed at the approximately 200 Dan-ish companies whose shares are admitted to trading on a regulated market.The recommendations are so-called soft law. Soft law reflects best practice incorporate governance and is characterised by voluntary participation, whichensures adequate flexibility in the recommendations.As part of the “comply or explain”-approach, the individual company de-cides whether and to what extent it wishes to comply with the recommenda-tions. If a company fails to comply with a recommendation, it must explainwhy and specify different approach.It is still too early to say how the companies have worked with the revisedrecommendations from August 2011. The new recommendations will beevaluated in the summer of 2012. The preliminary evaluation shows that anumber of companies actually have set objectives for 20-40 % female boardmembers by 2015.Voluntary initiativesIn Denmark, several initiatives have been implemented based on a close co-operation with the private sector, including a Charter on more women inmanagement and the so called “Operation Chain Reaction” – which aims atpromoting more female board members.“Operation Chain Reaction”“Operation Chain Reaction - Recommendation for more women on supervi-sory board” was launched in 2010 by the Danish minister for gender equalityin close cooperation with representatives of Danish trade and industry andthe Confederation of Danish Industry. As co-signatories of “Recommenda-tion for more women on supervisory boards”, the companies undertake, over

the coming years, to work consistently to develop and recruit more femalemanagers to the supervisory boards of Danish limited liability companies.In less than six months 56 major companies have signed the recommenda-tions. The companies represent a large number of stakeholders within thebusiness community.The preliminary evaluation of Operation Chain Reaction shows, that therehas only been a slight increase in the number of female board members.Since board members are often elected for a 4-year period it is still too earlyto say if more changes will occur when the boards have to appoint newmembers. On the other hand, the preliminary evaluation also shows that thecompanies have launched internal initiatives to increase the pool of femalecandidates.“Charter for more women in management”“The Charter for more women in management” was introduced in 2008. Thecharter has been drawn up jointly with public and private sector companiesas part of the Government’s efforts to encourage companies to inspire morewomen to take up management positions.In endorsing this charter companies undertake to make concrete efforts tobring more women into management positions. Efforts will be adapted to theparticular company’s circumstances – for example sector conditions – andthe current share of women managers.Each company is required to submit a baseline report to the Ministry forGender Equality, which describes concrete efforts. Every second year thecompanies have to evaluate their initiatives.

The Danish Government will in fall 2012 propose legislation with the fol-lowing elements to address the issue of gender imbalance in corporateboards:1) The 1.100 largest companies (both private and public) will be obligedto individually set up realistic and ambitious targets for theunderrepresented gender on corporate boards and give an account ofboth the objectives and the progress made in achieving the objective.2) The 1.100 largest companies will furthermore be obliged to promotepolicies for increasing qualified candidates of the underrepresentedgender in the company’s management levels in general to sustain anacceptable balance and to increase the recruitment base of candidatesto company boards.3) Companies must give an account in the companies’ annual report ofthe objectives and the progress made in achieving the objectives andgive an account of the policy for increasing the number of the under-represented gender in the company’s management levels in general,how the policy is implemented and what progress is made. If thecompanies fail to do so, they may be fined.4) State owned companies are obliged – regardless of size – to set upobjective targets and policies for the underrepresented gender.The Danish Government will advise both private and public companies to setobjectives as ambitious as possible.The Danish government believes that this model contains appropriate andsufficient measures to address gender imbalances.

The Danish Government is convinced that Danish companies as well as thesociety in general will prosper if we manage to activate the country’s mosttalented, competent and able individuals. Some international studies indicatethat there is a positive link between diversity in the boardroom andthe financial performance of a company. However, the advantage of havinga larger talent pool and thus more women on boards of directors is the mainreason why it remains important that we help the process along.(4)Which objectives (e.g. 20%, 30%, 40%, 60%) should be definedfor the share of the underrepresented sex on company boards and

for which timeframe? Should these objectives be binding or a re-commendation? Why?As described in the answer to question 2, the Danish Government proposes amodel where each company sets up objectives for the underrepresented gen-der on the corporate boards. These objectives and the concrete timeframeshould be developed by the company in due respect of their individual gen-der balance situation. The Danish Government will advise both private andpublic companies to set objectives as ambitious as possible.This will ensure flexibility for each company – regardless of industry – to setup objectives, while the companies’ right to self-management is respected.

A way of increasing the number of women on company boards would be toextend the field of application further than just listed companies. It should al-so be considered to include other large companies of substantial economicimportance to society. Likewise. it should be considered not only to includerepresentation at board level, but also to promote policies for increasing qual-ified candidates of both genders in management positions to sustain an ac-ceptable balance.This solution will prevent that additional requirements are imposed on com-panies caused only by the fact that they are listed. By including a lager groupof companies, this solution will also increase the recruitment field of quali-fied candidates more than a solution that only focuses on listed companies.

This issue is strongly interlinked with national company law and practice.Some jurisdictions traditionally apply the two-tier system while others have atradition to apply the one-tier system or sometimes a mixture of the two sys-tems. The Danish company law allows for all three possibilities.As described in the answer to question 2 the Danish Government suggests amodel where each company sets up objectives for the underrepresentedgender on corporate boards.

At the same time companies will be obliged to promote policies for increas-ing the number of the underrepresented gender in the company’s manage-ment levels in general to sustain an acceptable balance and to increase the re-cruitment base of candidates to company boards.It is the opinion of the Danish Government that it is not enough to focus onthe top level, i.e. on the board of directors. It is important to secure the “sup-ply chain” of qualified candidates and therefore focus also has to be on in-creasing the number of the underrepresented gender in the company’s man-agement levels in general.