A little-known aspect of a new EU Directive is set to enforce mandatory targets for the number of women on boards onto majority of the big financial services firms in the UK. These rules have come to light after the two UK agencies that regulate the financial services industry (the FCA and the PRA) recently published consultation papers on the EU’s Capital Requirements Directive IV (CRD IV). Hidden in CRD IV is a regulatory requirement for large banks, building societies and investment firms with nominations committees to set targets for the number of women on their boards. Financial regulators are consulting on the plans at the moment, and if enacted, these legal requirements will come into effect on 1 January 2014.
The idea of having regulation around this issue remains wholly unwelcome, and to some extent any regulatory measures emanating from the EU will be purely academic as large banks already have stated targets. The UK is making strong progress without regulation, getting on with actions to improve female representation at all levels (not just boards), and there has already been a lot of voluntary efforts by businesses both inside the financial services sector and beyond. It is crucially important that these actions remain voluntary as it will result in them being ‘owned’ and believed in by companies and institutions, creating sustainable, meaningful change. Rules, on the other hand, can give the appearance of progress but can end up with lip service adherence. Companies need to own decision making for it to be effective, not have it forced upon them.
The EU tried before (MIFID II, 2011) to introduce gender quotas by the back door and that attempt failed – they now appear to have incorporated gender target requirements as part of a very broad package of measures aimed at improving financial stability. The 30% Club enjoys the support of the FCA Chairman John Griffith-Jones and of course we welcome Mark Carney’s recent comments – but those should not be muddled with unhelpful and unnecessary regulation – the UK is already making progress in the right way.