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Tuesday, November 13, 2012

Women on Corporate Boards: Britain vs. the E.U. Justice Commissioner

In 2012, women made up 13.7% of board positions in large listed companies in the E.U., and 15% for nonexecutive board positions, according to The Wall Street Journal. In the U.S., according to Kay Koplovitz of USA Network, the number of women on corporate boards had been stalled at more or less 15 percent for over ten years. Whereas in the U.S., people would look at Congress to enact a uniform inter-state standard or else leave the matter to individual corporations, the E.U. has other alternative means, such as the directive. That device relies on the state governments to decide on the penalties as well as enforcement against violators of the E.U. law. Even though the Commission could take a state refusing to implement a directive to the European Court of Justice, the “cost” of the flexibility in the state-based implementation is a possible dilution in the law’s aims being achieved throughout the E.U. rather than just in a few states. Put another way, even as the ideological diversity within the empire-scale union is accommodated, advocates of more female representation on corporate boards may be disappointed as some states give non-complying companies only a slap on the wrist.
 
Initially, Viviane Redig, the E.U. Justice Commissioner, proposed federal fines for companies in the E.U. that fail to have female board membership of at least 40% by 2020. Facing opposition from Britain, the Netherlands, Malta, the Czech Republic, Latvia, and Bulgaria over legally binding provisions to be enforced by the Commission, she “revised and resubmitted” her propose now in the form of a directive whereby sanctions would be determined by the individual states. “In the new proposal,” according to the New York Times, “sanctions would apply only in cases where companies that fell short of the 40 percent threshold failed to establish adequate selection procedures.” Additionally, the states decide what are to be the sanctions. Hence, even though the states are required (i.e., directed) to implement the E.U. law under the commissioner’s amended proposal, the discretion, which is considerable, could be expected to result in substantive differences in enforcement throughout the union. In other words, the E.U. Commission would have a difficult case arguing before the ECJ that a state had refused to implement the directive. The court would have to wade in on what counts as minimally adequate selection procedures and sanctions. The device itself—the directive—is explicitly oriented to accommodating differences that exist between the states, so judicially-established “minimum standards” applicable to every state implementing a directive would doubtless be far lower than the advocates of the particular policy would prefer.
 
Meanwhile, in the US at least four states had recently decided not to expand health-insurance subsidies to the uninsured poor under the expanded Medicaid program that had been passed by Congress as part of “Obamacare.” In its ruling on the federal law, the federal Supreme Court decided that requiring the states to expand their participation in the program constituted an encroachment by the U.S. on the state governments.  Someone looking at this “opting out” by states including Florida, South Carolina, Alabama, Iowa, and Louisiana might conclude that the directive on women on boards in the E.U. would similarly enable “red states,” including Britain and the Czech Republic, to opt-out too. The respective costs are that uninsured poor in states like South Carolina continue to be uninsured (and thus without access to clinics) and women in states like Britain continue to be discriminated against at the board level. In short, accommodating real differences between states in empire-scale unions has a cost in terms of specific policy objectives, and one might even say equality itself.
 
At the time of the debate on a mandated quota by the college of commissioners, considerable diversity at the state level existed in the E.U. with respect to public policy on quotas. In the state of France, women made up 22.3% of board-membership at blue-chip companies at the time—the state having already introduced quotas with an aim of 40% by 2017. The Netherlands too had enacted mandatory quotas, but without major penalties. Spain and Italy had enacted only voluntary quotas, and as one might expect, the British House of Lords had criticized the very notion of mandatory quotas. This diversity is innate, and thus entirely reasonable in a union as large as the E.U. We could expect the same sort of spectrum from state to state in the U.S.
 
Inhibiting interstate diversity has a cost, as a one-size-fits-all federal rule does not accommodate the differences and thus builds political pressure within the federal system. Yet obviating this cost by the E.U. directive (and the expanded-Medicaid opt-outs from “Obamacare” in the U.S.) is bound to result in another sort of cost. In particular, the goal of 40% female representation union-wide will almost certainly by stymied by the states refusing to implement the directive by enacting an involuntary mandate with teeth. Either way, there is a cost. Giving each its due is difficult because the costs are qualitatively different and thus are difficult to compare and weigh with each other.
 
In the U.S. during the twentieth century, the overwhelming trend was to avoid the cost in terms of reaching goals union-wide on particular issues. This came at the expense of recognizing the legitimate differences between the states. Considerable pressure of pent-up or frustrated diversity had doubtless accumulated in the process, though an eruption could presumably be decades or even centuries off. The accent in American politics had been on achieving particular policy aims, union-wide, rather than on maintaining a balance in the federal system between the union and the states. It is an open question, at least as of 2012, whether the E.U. too would follow such a trajectory as it matures past its development stage.
 
That E.U. states had been extant far longer before creating a union may delay any such “inevitable” consolidation. More significant, however, may be the more direct involvement of heads of the state governments in the European Council (rather than having delegates, or senators) along with the established device of the directive as an alternative to union-wide rules. That is to say, rather than relying on the states’ rights ideology at the state level in the current generation (something that was also the case in the U.S. during its first hundred years), the federal design might turn out to be more decisive, though perhaps ultimately insufficient if a future generation wants or insists on union-wide achievement of particular policy-aims.
 
Ideally, particular policy-aims should be balanced against the need in any empire-scale federal system to allow its states some breathing room owing to the inherent differences between them. The viability of this principle does not depend on what the people prefer, as long as there are differences between the states culturally and ideologically and public-policy aims whose validity can claim to be universal in nature. As modern American history illustrates, it can be all too tempting to succumb to the normative point that women should not be discriminated against and thus suspend one’s concern for the viability of diversity within the federal system. Yet the hegemony of particular ideological or normative goals can unintentionally compromise the achievement of a more perfect union.
 
 
Sources:
Frances Robinson, “EU Directive to Balance Women in Boardroom,” The Wall Street Journal, November 13, 2012.
James Kanter, “Renewed Push in Europe To Seat Women on Boards,” The New York Times, November 14, 2012.
Kay Koplovitz, “Women on Corporate Boards in U.S. Lagging the Global Trends,” The Huffington Post, September 19, 2012.