19/10/2015
Melsa Ararat's recommendation submitted to the W20 Summit regarding flexible quotas for women on corporate boards was adopted.
Sabancı University Corporate Governance Forum Director Dr. Melsa Ararat spoke to the representatives of the member states at the W20 Summit on “Women Leadership in Public and Private Sectors." Melsa Ararat's recommendation was adopted in the W20 summit and will be presented to the G20 Summit. The W20 is an engagement group fully committed to achieve a gender inclusive global economic growth in the G20 countries through the economic empowerment of women.
Speech delivered by Dr. Melsa Ararat, Sabancı University, at W20 at Istanbul Session 3: Women Leadership Both in Public and Private Sector.
October 17, 2015
Madam chair and honorable delegates,
Thank you for inviting me to speak at the very first W20 meeting on women leadership. I am a scholar, a feminist and a social activist. My work focuses on corporate governance, and specifically on the role of boards in determining firm performance. I am also a member of the board of governors of the International Corporate Governance Network, which includes the worlds’ largest institutional investors from 45 countries among its members. As a citizen of both Turkey and the UK, and a resident of the Netherlands, I am involved in various research and advocacy initiatives internationally around the topics of gender diversity and governance.
My informed opinion is that there is a consensus among researchers and investors around the world, that gender diversity does improve the boardroom performance, and consequentially the economic, social and eventually the financial performance of companies. There is also a consensus, based on research and the experiences of the past decade, that severe underrepresentation of women on corporate boards has little to do with the supply, but is an indication of entrenched boards and bad governance. In order to address the problem some countries rely on ‘comply or explain’ mechanisms, voluntary targets and enabling initiatives, while European states are moving along the legislative quota line. Unfortunately most strategies other than legally binding quotas have failed to deliver results, or improvements have not been sustainable.
I agree that legislative measures are controversial, however persistent overrepresentation of men in boards is hardly justifiable. The draft W20 communiqué recommends G20 states ‘to set targets or quotas’ to help women break the glass ceiling. Targets work, but rather too slowly unless they are legally endorsed and enforced. We should also be aware of the big differences between countries with respect to the current level of gender diversity in boards of the member states, varying from 3% to 29% - excluding Saudi Arabia where the women representation on boards is zero percent, and to the level of participation of women in the work force. These differences suggest that the nature and the amount of effort required for improving gender diversity in boards is different for each member state. With this understanding, I propose to expand the wording of the draft communiqué as follows:
‘W20 invites G20 member states to set nationally determined gender diversity targets for the board of directors of economically and socially important companies, without prejudice to the legal nature of the means of achieving that target, that is no less than 25% for the underrepresented gender and at least 25% higher than the current level in the country, that is publicly disclosed in a manner that facilitates the understanding of the incentives and enforcement mechanisms as well as the intended legal instruments and work programs to facilitate the process of reaching that target, by 2025 or until parity is reached. W20 also suggests that the member states establish their targets, legal instruments and work programs, and be prepared to share them at W20 2016.’
Thank you for listening.
Draft Communiqué:
Preamble:
‘Lack of women on corporate boards has consequences for societies. Studies show that corporations with more women on their boards behave differently. They are more consumers oriented, more transparent, more environmentally conscious and have better human resources policies for women employees. Women employees are better motivated if there are women on the board. Companies with women directors also tend to have less structural layoffs. Empowering women fuels thriving economies, spurring productivity and growth. In the aftermath of the financial crisis, various commentators and government ministers have suggested that the tragic collapse of some major institutions might have been mitigated had there been more women on the boards to moderate the financial performance focused risk-taking culture. This view backed up by a number of research studies on the effect of gender on risk-taking, which shows that women are more stakeholder oriented and more risk averse than men.
Women quotas in political representation aim to encourage improving women’s condition through laws and policies, they would not be effective unless they are coupled with the quotas for women in corporate boards, which have the power to allocate economic / financial resources, to develop human capital and have the capacity to influence laws and regulations through political lobbying. Largest companies listed on the stock exchanges around the world play a significant role in global business as well as contributing significantly to the national economies within which they operate. The decisions taken by these companies have ramifications not only for their businesses and their employees but also for the whole economy. Additionally, education, mentoring and support in the careers, and improving working conditions of women are important pathways to reach diversity in boardrooms.1’
The W20 proposal:
‘A quota or voluntary targets for women in decision making roles needs to be agreed. The W20 proposal is to have 25% women by 2020 in top management of the corporations in the boards and in the number of CEOs to build on the next steps of gender inclusiveness.’
1 Sabancı University Corporate Governance Forum (2011), Gender Balance and Women Empowerment at Turkey’s Corporate Boards.