WOMEN ON BOARD Quality through Diversity

Scottish Government Consultation on the Introduction of Gender Quotas on Public Boards Executive Summary

Scottish women make up 52% of the population and, in October 2013, the level of female employment in reached its highest level since 1992 at 69%. Women also now make up the majority of University graduates.

In spite of all this, there is still significant gender inequality on public boards, with women comprising only 36% of board places and 21% of the current board chairs1.

Currently the Scottish Parliament does not have legislative powers to address this issue. We have therefore opened up dialogue with the UK Government on transferring powers by way of an Order under section 30 of the Scotland Act 1998.

Such powers would give the Scottish Parliament additional levers for change, should it choose to use them, where other mechanisms are not working, or are not delivering change fast enough.

This consultation sets out to gather views from individuals, public bodies and other organisations with an interest in the issue of gender imbalance on public boards, on how mandatory quotas that ensure a minimum of 40% of women’s representation on public boards should be introduced. We want to capture the issues that would arise from this step for those involved. Findings from this consultation will also support the work of the ’s Public Appointments and Corporate Diversity Programme which aims to increase the diversity of Scotland’s public boards via a range of activity. We are also seeking initial views in this consultation on whether potential legislation should be extended to company boards. We will explore this in more detail separately in due course.

1 Scottish Government’s Public Appointments Centre of Expertise (PACE) figures which only include Ministerial appointed, regulated public boards. Other boards are not included in these figures

1 Executive Summary

Ministerial Foreword 3 Contents

Part one: Background and context 4

Aim of consultation Public boards and bodies Current gender composition of public boards and bodies Why is gender diversity on public boards important? What are the barriers to increasing gender diversity on public boards?

Part two: Current processes 9

Voluntary processes (non-legislative) Legislation How gender quotas are used internationally Part three: Options for change 14

Where are we now? Where we want to be How the powers could be used Part four: Company boards 16

Should gender quotas be extended to company boards? Part five: About this consultation 18

Business and regulatory impact assessment Equality impact assessment The Scottish Government consultation process Handling your response Next steps in the process What happens next Comments and complaints

Annex A: List of Public Authorities Annex B: The Experience of Norway Annex C: Respondent Information Form Annex D: Consultation Questionnaire

2 Ministerial Foreword

It is often said that women hold up half the sky. However, this is not reflected in positions on decision making bodies – the boards of public bodies. We know that having a gender balance is good for governance and leads to better decision making. It is also right and fair that women are represented in all sections of society, and can be part of making the decisions that affect all aspects of our lives. Women now account for more than 36% of all board members on public boards. But we need to go further, and I am determined that the Scottish Government achieves its Equality Outcome that public appointments reflect broadly the general population by 2017. We need to ensure that we do not have to wait years to achieve equality on our boards.

Scottish women clearly have a voice to be heard. However, currently we do not have legislative powers in this area, which is why we are in discussions with the UK Government to transfer these powers. The responses to this consultation will inform our dialogue with the UK Government as part of this process.

Our aim for Scotland is to make the best use of talents of all of our people, regardless of age, race, gender, sexual orientation, gender identity, disability or religion. By taking action on this issue we will be improving economic participation by removing barriers that stand in the way of women realising their potential. It will also contribute to making Scotland a wealthier and fairer place, ensuring no one is held back because of their gender, and ensuring public bodies more fairly reflect society as a whole.

To make real progress there are a number of factors to consider. These include fostering partnerships to help shift cultural attitudes, communicating the benefits of gender diversity on boards, adopting more family-friendly practices and further developing the talent pipeline for women who wish to be considered for public appointments.

Although this consultation focuses on gender representation on the boards of public bodies, we recognise that a number of equality groups are under-represented in public life and in public appointments. So we also suggest that the approach outlined in this consultation could be applied more broadly to other equality characteristics. And the diversity of women is also a factor – increasing women’s participation can also increase the representation of other protected characteristics such as race and disability.

There is also the question of whether quotas should be applied for the boards of companies too. We will consult separately about that in due course but start to increase our understanding of the issues involved for these sectors by asking some initial questions in this consultation. We now wish to hear your views about quotas for the boards of Scotland’s public bodies. Progress on this issue will impact on the whole population and form a significant plank in our aim to be a fairer, more equal Scotland.

Shona Robison MSP Cabinet Secretary for the Commonwealth Games, Sport, Equalities and Pensioners’ Rights

3 Part one: Background and context

Aim of consultation

The aim of this consultation is to inform how the Scottish Government will shape its proposals to the UK Government on using legislation to achieve gender equality on the boards of our public bodies, through the use of mandatory quotas of women sitting on public boards. We want to capture the issues that would arise from this step for the organisations, individuals and bodies involved. Findings from this consultation will also support the work of the Scottish Government’s Public Appointments and Corporate Diversity Programme which aims to increase the diversity of Scotland’s public boards via a range of activities.

Public boards and bodies

Most public bodies are organisations which receive at least 50% of their funding from central government, e.g. National Galleries of Scotland, Scottish Environment Protection Agency.

They are not part of the Scottish Government and operate to a greater or lesser extent at arm’s length from Ministers.

Bodies which are Non-Departmental Public Bodies (NDPBs) are generally managed by a board whose members are appointed by Ministers.

The main categories of NDPB with boards are: Executive NDPBs, e.g. , Advisory NDPBs, e.g. , The Historic Environment Advisory Council for Scotland Public corporations and nationalised industries National Health Service bodies

For a list of public authorities see Annex A

Current gender composition of public boards and bodies

Although significant progress has been made in recent years, women continue to be under-represented on public boards, and also as the chairs/convenors of public boards.

In Scotland women represent 52% of the population, however in 2013, only 21% of chairs were women.

Currently female representation on regulated public boards stands at 36%.

As of January 20132, there were four public boards with no female representation at all, and 10% of public boards had fewer than 20% of women on them. The largest

2 Scottish Government’s Public Appointments Centre of Expertise (PACE) figures which only include Ministerial appointed, regulated public boards. Other boards are not included in these figures

4 number of boards had between 20% and 40%. Boards with over 60% of women accounted for around 8% of boards.

Number of Regulated Public Boards and % of Women on these Boards in 2013

Since 2005, the percentage of women appointed to boards has been significantly higher than the percentage of women applying. This suggests that the calibre of women applying for public appointments is high, and that the system itself provides women with a good chance of being successful. It also suggests that there are women with the available skills, abilities and experience to fill these posts.

In 2013, women became more successful through each stage of the public appointments recruitment process.

In 2007 the Scottish Women’s Convention undertook a survey, as part of the then Commissioner for Public Appointments work on Diversity Delivers, which suggested that women are less confident in their own abilities and therefore less likely to apply for a job than men if they do not fulfil all essential and desirable criteria. This could explain why proportionally more women get through the stages of the recruitment process once they have applied, than men.

The Scottish Government’s ‘Diversity Delivers’ target is to have at least 40% of public boards made up of women

5 Here is a summary of the gender composition of Scotland’s Public Boards (Scottish Ministerial Appointments):

In total 36% of board members, of the publically appointed, are female 21% of board chairs/conveners are female 40% of board members of Non-Ministerial Departments (NMDs) are female 11% of board members of Public Corporations are female 29% of board members of Executive NDPBs are female 38% of board members of Advisory NDPBs are female 42% of board members of Health Bodies are female 25% of board members of Other Significant Bodies are female

Overall, NMDs and Health Boards meet the 40% target of women board members. However, within each of the categories listed above there is some variation.

Gender Diversity Statistics in Scottish Public Appointments 1 Feb 2013 to 31 Jan 2014 Counts and column percentages Reached Invited to Applied Shortlist Interview Appointable Appointed Female 651 34.0% 644 34.1% 152 32.1% 64 33.0% 44 36.1% Male 1229 64.2% 1209 64.1% 311 65.8% 130 67.0% 78 63.9% Prefer not to say 34 1.8% 33 1.7% 10 2.1% 0 0.0% 0 0.0% All 1914 100.0% 1886 100.0% 473 100.0% 194 100.0% 122 100.0%

No suppression of counts less than 5 in this table because 'prefer not to say' is not protected characteristic.

Why is gender diversity on public boards important?

Work on this issue is not just about fairness or giving women opportunities. There is also strong academic evidence to support the theory that greater diversity on boards leads to better governance. If a board better reflects the people it serves, it will be better equipped to make decisions affecting them, and so improve its performance.

People from diverse backgrounds have diverse experiences which they can bring to the role. Evidence also shows that organisational cultures which are not solely rooted in traditional male norms will attract a wider pool of talent, both men and women.

The business case for increasing the number of women on the boards of companies is clear and well established and is highly likely to be the case also for public boards.

The third annual Women on boards progress report, published by Lord Davies of Abersoch in March 2014 on behalf of the UK Government outlines a number of ways in which increasing the number of women on boards can benefit business. These include:

improved performance at board and business levels through input and challenge from a range of perspectives

6 accessing and attracting talent from the widest pool available

enabling businesses to be more responsive to market by aligning with a diverse customer base, many of whom are women

achieving better corporate governance, increasing innovation and avoiding the risks of ‘group think’ - where group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative viewpoints, by actively suppressing dissenting viewpoints, and by isolating themselves from outside influences.

We now also better understand some of the more complex issues which have prevented many women reaching the boardroom during the course of their careers. These include performance management systems, unconscious bias and limited access to challenging career opportunities, as well as other cultural factors in the organisation. Again, these issues are also relevant for public boards

What are the barriers to increasing diversity on public boards?

The Scottish Government is committed to tackling the barriers which women face in maximising career opportunities.

On 5 November 2013, the Scottish Government held the Women On Board: Quality through Diversity event in Edinburgh. The event was attended by Chairs from a wide representation of Scotland’s public boards, officials involved in the appointments process and women who are considered to be genuine prospects for board positions, having applied previously for public appointments or indicated their interest in doing so.

Issues discussed at the summit included how to streamline the application process, how to adopt more flexible and family-friendly practices, fostering partnerships to help shift culture, and promoting positive attitudes to women on boards.

Other barriers which contribute to the under-representation of women on boards include:

a general lack of awareness of public appointments amongst under- represented groups the tendency of women to undersell themselves and feel the need to meet all aspects of a person/job specification before applying the impact of different publicity strategies, e.g. hard copy press can yield more applicants from white males unclear and unfocused person specifications the application process itself

7 The Sex and Power Scotland Report 20133 also demonstrates the under- representation of women in the most senior occupations throughout the country. The report gives several reasons why women’s careers tend to stall, including:

a lack of senior positions available on a part-time/flexible basis and, as women are more likely to have caring responsibilities, this has a disproportionate effect on women the long hours culture and presenteeism disproportionately impact on women with caring responsibilities traditional forms of business networking are associated with the “old boys” network which can be difficult for women to access informal recruitment processes which rely on access to networking opportunities recruitment processes that favour experience and time served, rather than skills and competence discrimination based on age and gender women on maternity leave missing out on promotional and training opportunities

These barriers are significant, however there has been some improvement in recent years, but more needs to be done, which is why alongside pursuing the power to introduce quotas, the Scottish Government is also developing a programme of actions to further address this issue. The Public Bodies and Corporate Diversity Programme was established in December 2013 to oversee the development and delivery of a Programme of work that will increase diversity on public boards and within the Scottish Government workforce. Programme objectives are:

To provide strong leadership and a commitment to this agenda and seek to influence the wider public and private sectors to improve the representation of women and other under-represented groups in public life more generally. To make Ministerial public appointments more diverse reflecting broadly the general population by 2017. For the Scottish Government workforce to be broadly reflective of the Scottish Population by 2025.

3 Sex and Power 2013: http://www.fawcettsociety.org.uk/wp-content/uploads/2013/02/Sex-and- Power-2013-FINAL-REPORT.pdf 8 Part two: Current processes

Voluntary processes (non-legislative)

Currently there are a number of processes in place to encourage public boards to increase diversity on a voluntary basis. In doing so, public bodies are expected to set their own targets for gender, and report on their progress in annual reports.

The Diversity Delivers Strategy was developed by the then Commissioner for Public Appointments (now called the Commission for Ethical Standards in Public Life in Scotland).

Diversity Delivers was a three year programme between 2008 to August 2011.

In 2011, the Commissioner reported to Scottish Ministers on the resulting short term actions in a report: http://www.publicappointments.org/publications/publication/572/diversity-delivers- three-years-on

The medium to long term actions within Diversity Delivers will continue to be taken forward by the Scottish Government’s Public Appointments Centre for Expertise as part of the work of the Public Bodies and Corporate Diversity Board

The Scottish Government’s vision for the public appointments process within Diversity Delivers was three-fold:

A Awareness and Attraction

A pool of applicants as diverse as the people of Scotland, aware of and attracted by the work of our public boards and the opportunities to serve on their boards.

C Confidence and Capacity

An appointment system that inspires confidence, increases capacity and embraces diversity, from the application process to the boardroom.

E Education and Experience

A programme of support for future leaders, developing and providing opportunities for all to achieve their full potential and for Scotland to draw upon its brightest talent.

Actions to achieve this vision can be summarised as:

Awareness and Attraction

Developing an on-going awareness campaign to promote the importance of diversity and the wide range of people needed by boards, monitoring the

9 impact of publicity strategies on the number and diversity of candidates, and researching the impact of board meeting times, remuneration and diversity.

Confidence and Capacity

Establishing a centre of expertise to manage the public appointments process, providing diversity training for all involved in the selection process and revising the then Office of the Commissioner for Public Appointments in Scotland (OCPAS) Code of Practice to reflect the actions in the equal opportunities strategy.

Education and Experience

Providing an education programme for members of the public to explain the work of non-executive board members of public bodies, providing workshops on how to apply for positions, piloting training courses, and developing leadership potential in Scotland.

The compete Diversity Delivers strategy can be viewed or downloaded here. http://www.publicappointments.org/publications/publication/641/

Legislation

There are currently a number of pieces of legislation which are relevant to the making public appointments. These are:

The Public Appointment and Public Bodies etc. (Scotland) Act 2003

Scotland’s public appointments process is governed by the Public Appointments and Public Bodies etc. (Scotland) Act 2003. A key purpose of the Act is to provide the framework for an open and fair ministerial public appointments process.

Scotland’s public appointments process is based on the following principles:-

o Merit All public appointments must be made on merit. Only people judged best able to meet the requirements of the post will be appointed. o Integrity The appointments process must be open, fair and impartial. The integrity of the process must earn the trust and have the confidence of the public. o Diversity and Equality Public appointments must be advertised publicly in a way that will attract a strong and diverse field of suitable candidates. The process itself must provide equality of opportunity.

10 The Equality Act 2010

No one should be denied opportunities because of their age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, sex, or sexual orientation. This principle underpins all the work of the Scottish Government and is embodied in the Equality Act 2010.

In April 2011, a new public sector equality duty in the Equality Act 2010 came into force. This is often referred to as the general duty. This covers the relevant protected characteristics age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, sex and sexual orientation.

The EU Equal Treatment Directive

EU law (principally Directive 2006/54/EC regarding equal treatment) ensures that there are equal opportunities and equal treatment for men and women in relation to employment, promotion and vocational training, working conditions and pay.

EU law does not permit provisions which would allow a woman to be preferred over a man for an appointment, unless the candidate has the equivalent merits and has been through the relevant assessment procedures.

The equal treatment Directive empowers Member States to make necessary arrangements for the promotion of and support for equal treatment so that there is no discrimination on the grounds of gender.

How gender quotas are used internationally

Legislative measures

There is an increasing direction of travel internationally towards the introduction of legislative measures to increase the pace of change towards gender equality in the boardroom. The forthcoming literature review undertaken by the Employment Research Unit at Napier University4 looks at gender representation in Austria, Belgium, Denmark, Finland, France, Iceland, Ireland, Israel, Italy, Norway, Spain, Switzerland and the Netherlands.

These countries have recently introduced laws on gender quotas for company boards, however, there is significant variation in the way in which each country has adopted quotas.

Different approaches include severity of sanctions; timescales for reaching quota targets; incentives; whether the law is temporary or permanent; company size and ownership structure; and the range of roles on the board.

4 Overcoming Barriers to Equality and Diversity Representation on Public, Private and Third Sector Boards in Scotland; Employment Research Institute, Edinburgh Napier University, April 2014 11 The European drive for change

With its ‘Strategy for Equality between Women and Men 2010’, the European Commission placed the issue of women on boards high on the political agenda. In 2011, it went on to call for credible self-regulation by companies to ensure better gender balance in their boards.

Evidence of change however has come too slowly, which is why in November 2012 the Commission put forward a law - a procedural quota - which would establish an objective for 40% of each sex as non-exec directors by 2020. If a company cannot reach this threshold, it will have to apply clear and gender-neutral criteria in the selection process. In the case of equal qualification, priority will have to be given to the candidate of the under-represented sex. If companies do not comply then they would face sanctions to be decided by each Member State.

This sits against a backdrop in October 20135, with an average of only 17.8% women on the boards of the largest publicly listed companies registered in the EU- 28 Member States. This represents a rise of 1.2 percentage points in the previous six months (16.6%). There are still only five countries – Finland, France, Latvia, Sweden and the Netherlands – in which women account for at least a quarter of board members.

On 20 November 2013, the European Parliament voted for the first time, by 459 to 148, with 81 abstentions, in favour of the law for mandatory quotas. The measures if fully adopted, would apply to approximately 5000 listed companies within the EU by 2020 that have more than 250 employees and state owned companies by 2018. If enough European governments back this proposal before the European elections to the assembly it could become law. The issue now rests with the Employment and Social Council and is being promoted as part of the Greek Presidency. There is a ‘blocking minority’ of countries of which the UK Government is part, that do not support the issue of enforced quotas, preferring to adopt voluntary measures. This proposed law has been backed by the Women’s Forum known as the ‘female Davos‘ –in January 2014, MEP Silvana Koch-Mehrin stated that “Although it’s a symbolic measure, it’s powerful. It’s a good legislation; it touches a nerve, which means that it goes to the substance. From there, you can develop other arguments.”

The use of quotas in other countries

One reason for this building international momentum towards legislative measures is the success of Norway’s quota system, which requires the boards of public companies to have at least 40% women directors. Norway is often cited as an example of the impact of statutory quotas where a company may be dissolved for failure to comply. See The Experience of Norway in Annex B

5 The data, collected in October 2013, covers 610 of the largest publicly listed companies from the 28 Member States of the EU. Information is available at: http://ec.europa.eu/justice/gender- equality/gender-decision-making/database/business-finance/index_en.htm

12 France too has introduced legislation requiring that women constitute 50% of the boards of directors of publicly listed companies by 2015.

Spain has also introduced a regulatory requirement that from 2015 any private company that is awarded a public contract must have a board of directors of whom at least 40% are women.

In Iceland in September 2013, the parliament adopted a legislative reform requiring publicly owned companies and public limited companies that have at least 50 employees and boards of more than three persons, to have at least 40% of each gender.

In March 2014 plans were unveiled by centre-left ministers in Angela Merkel's German coalition government, for quotas of 30% women board members. This would apply to listed companies which have employee representation on their supervisory boards - affecting more than 100 firms. They could be phased in from 2016 to 2020. Companies will gradually work towards meeting the quota through filling vacancies that arise. Companies not meeting the quota will be required to fill vacancies with women or else will have to leave the positions unfilled. (http://www.reuters.com/article/2014/03/25/us-germany-women-boards- idUSBREA2O1AT20140325 )

The use of voluntary measures internationally

Some countries have opted for voluntary measures using the ‘comply or explain’ principle. This covers transparency in promotion and recruitment processes; education and training initiatives; corporate governance codes; and charters promoting women in management.

However, as with the current position, there are no significant levers to ensure change occurs and is maintained.

QUESTIONS

1. Voluntary measures to increase gender diversity on public boards have been in place for some time. Why do you think they have not led to the achievement of the 40% Diversity Delivers target? Please give reasons for your answer.

2. Do you think that before gender quotas are introduced to public boards, public bodies should be given the opportunity to achieve a voluntary target for gender diversity on their board first? YES, NO or DON’T KNOW Please give reasons for your answer.

3. If you answered ‘yes’ to question 2, what is a realistic timescale for boards to reach a voluntary target, after which quotas would be introduced?

13 Part three: Options for change

Where are we now?

Currently, the Scottish Parliament does not have legislative competence in relation to gender quotas on Scotland’s public boards. So the Scottish Government is now asking the UK Government to agree to an Order under section 30 of the Scotland Act 1998 to enable the Scottish Parliament to legislate on this issue in Scotland. That would give the Scottish Parliament additional levers for change, which it can use where other actions are not working, or are not changing things fast enough.

The information generated from this consultation will form part of this request to the UK Government.

We are seeking views from all members of the public, in particular, people involved in the appointment of public bodies, corporations, business, employment industry bodies and people involved in equality and diversity.

Where we want to be

Although change is happening which is taking us towards gender equality on our boards, the pace of change is very slow, is not consistent across all public bodies and gains can be lost from year to year, leaving us treading water with the danger that we do not make sustainable progress.

How the powers could be used

If the Scottish Parliament were able to legislate on gender quotas, then statutory powers could be used in tandem with existing voluntary measures. It might be, for example, that boards would be given a chance to achieve a gender/diversity balance by a set date, e.g. 2020. If this is not achieved, then legislation could follow. Any legislation on quotas would have to be compatible with EU law (see page 14).

New legislation for Scotland might reflect what other countries have introduced, for example:

a national law to achieve gender quotas for public boards legislation which enforces mandatory quotas changes to national equalities policies, e.g. a recommendation that boards must consist of both genders an equal gender balance where a man and a woman (‘as far as possible’) must be nominated for every vacancy

Penalties for non-compliance might include:

temporary loss of financial and non-financial benefits by board members annulment of board appointments verbal sanctions by regulatory bodies, fines or voiding of board’s actions

14 QUESTIONS

4. What difficulties, if any, do you think there will be in introducing gender diversity quotas for public boards?

5. What support, if any, do you think public bodies will require in order to introduce quotas effectively?

6. Which boards should quotas apply to? For example: those with Ministerial appointments only; Ministerial and non-regulated appointments; Neither Ministerial nor non-regulated? Please give reasons for your answer.

7. Which other public boards, if any, should be included? Please give reasons for your answer.

8. Which public boards, if any, should be exempt? Please give reasons for your answer.

9. Do you agree there should be quotas for people with other protected characteristics6 other than gender? YES, NO or DON’T KNOW If yes, which ones? Please give reasons for your answer.

10. If you answered yes to question 9, do you agree with the Scottish Government’s staged approach to the introduction of quotas i.e. focussing on gender first? YES, NO or DON’T KNOW Please give reasons for your answer.

11. We have said that the percentage level for gender diversity quotas on public boards should be at least 40%, do you agree? YES, should be 40%; NO, should be greater than 40%, NO; should be less than 40%; or DON’T KNOW. Please give reasons for your answer.

12. Who do you think should be responsible for enforcing quotas?

13. Do you think some form of sanction should be imposed on public bodies if there is non-compliance? YES, NO or DON’T KNOW.

14. If you have answered ‘yes’, to question 13 what type of sanction should be used? Please give reasons for your answers.

6 The Equality Act 2010 makes it unlawful to discriminate against people with a ‘protected characteristic’ (previously known as equality strands / grounds). The protected characteristics are age, disability, gender reassignment, pregnancy and maternity, marriage and civil partnership, race, religion or belief, sex and sexual orientation.

15 Part four: Company boards

The report, Women on boards, published in March 2014 by Lord Davies of Abersoch on behalf of the UK Government, highlighted the positive steps that many company boards have taken to improve the number of women in senior positions. It reported that over 250 companies have voluntarily signed up to the UK Government initiative Think, Act, Report (www.gov.uk/think-act-report ), and adopted the UK Corporate Governance Code which enables them to explain their policy on boardroom diversity.

However, women still currently only make up 20.7% of members of corporate boards of FTSE 100 companies, with two all-male boards still remaining. This is up from 12.7% in 2011 when the first Women on boards report was published but there is a strong possibility that the voluntary target of 25% will not be achieved by the deadline of 2015.

In 2011 British business overwhelmingly asked to be able to resolve this issue on its own. However, there has been a slowing down of progress in the following three years.

In Scotland, the Institute of Directors (IoD) and the Scottish Government have introduced an initiative which aims to give prospective board members a practical insight into how boards operate and what is involved in being a board member.

This is designed for individuals – particularly women – who are judged to possess the skills, attributes and potential to be a board member, but have little or no experience at board level. Selected individuals will be closely supervised and allowed to sit in on board meetings to see at first-hand how they work. This will build their understanding, confidence and capacity to fill appropriate posts in the future. This initiative is at an early stage and will require a strong commitment from all the partners involved.

Should gender quotas be extended to companies?

The Cranfield School of Management’s Female FTSE Report, published in April 2013, noted that progress with the Women on Boards agenda in the FTSE 100 had stalled in the previous six months.

Also figures from the Department for Business, Innovation and Skills (BIS) in March 2014 reported that progress was too slow and, unless there was a concerted boardroom hiring drive, the target of 25% female representation on FTSE 100 companies would not be reached.

If the rate of the rise in female directors from 2013 was repeated in 2014, it would still leave the UK shy of Lord Davies’s 25% target for 2015.

With this in mind, we are also seeking views on whether or not legislation on increasing gender diversity on public boards should also be extended to companies.

We will look at this possibility in more detail in due course.

16 QUESTION

15. Do you think gender diversity quotas should be extended to company boards? (please tick Yes, No or Don’t Know) please give reasons for your answer

Other General Issues not covered elsewhere

QUESTION

16. Please provide details of any additional issues, not addressed in your other responses, that you think should be considered in relation to the introduction of gender quotas on public and company boards.

17 Part five: About this consultation

Business and regulatory impact assessment

The Scottish Government is committed to consulting with all parties potentially affected by proposals for new regulation, or where any regulation is being changed significantly.

All policy changes, whether European or domestic, which may have an impact upon business or the third sector should be accompanied by a Business and Regulatory Impact Assessment (BRIA).

The BRIA helps policy makers to use available evidence to find proposals that best achieve the policy objectives while minimising costs and burdens. Through consultation and engagement with business, the costs and benefits of the proposed legislation can be analysed. It also ensures that any impact on business, particularly small enterprises, is fully considered before regulations are made.

In order for us to develop the BRIA for the proposed introduction of gender diversity quotas to public boards, it would be helpful if you could answer the following questions:

QUESTIONS

17. What resource issues, if any, will there be for public bodies to introduce gender diversity quotas on their boards? Please give reasons for your answer.

18. Can the impact of any resource issues for public bodies be quantified using existing costing structures? YES, NO or DON’T KNOW Please give reasons for your answer.

19. Will there be any resource issues for private companies to introduce gender diversity quotas on their boards? YES, NO or DON’T KNOW Please give reasons for your answer.

20. Can the impact of any resources issues for private companies be quantified using existing costing structures? YES, NO or DON’T KNOW Please give reasons for your answer.

21. To help with the development of a Business Regulatory Impact Assessment, please provide any other information you think is relevant.

18 Equality impact assessment

The Scottish specific equality duties require the Scottish Government to assess the impact of applying a proposed new or revised policy or practice against the needs mentioned in the general equality duty. The Scottish Government is also required to publish the results of such an assessment within a reasonable period.

To help inform our Equality Impact Assessment of the proposed introduction of gender diversity quotas to public boards, it would be helpful if you could answer the following questions:

QUESTIONS

22. The Scottish Government wants all women in their diversity to be represented on the boards of public bodies. Do you think there are currently barriers that especially impact on certain groups of women? YES, NO or DON’T KNOW. If yes, which groups of women and what are the barriers?

23. Do you think there is additional supporting action that could be taken to help certain groups of women overcome or mitigate these barriers? YES, NO or DON’T KNOW. If yes, what action and who should take it?

24. To help further with the development of our Equality Impact Assessment, please give any other information you think is relevant.

19 The Scottish Government Consultation Process

Consultation is an essential and important aspect of Scottish Government working methods. Given the wide-ranging areas of work of the Scottish Government, there are many varied types of consultation. However, in general, Scottish Government consultation exercises aim to provide opportunities for all those who wish to express their opinions on a proposed area of work to do so in ways which will inform and enhance that work.

The Scottish Government encourages consultation that is thorough, effective and appropriate to the issue under consideration and the nature of the target audience. Consultation exercises take account of a wide range of factors, and no two exercises are likely to be the same.

Typically Scottish Government consultations involve a written paper inviting answers to specific questions or more general views about the material presented. Written papers are distributed to organisations and individuals with an interest in the issue, and they are also placed on the Scottish Government web site enabling a wider audience to access the paper and submit their responses. Consultation exercises may also involve seeking views in a number of different ways, such as through public meetings, focus groups or questionnaire exercises.

Copies of all the written responses received to a consultation exercise (except those where the individual or organisation requested confidentiality) are placed in the Scottish Government library at Saughton House, Edinburgh (K Spur, Saughton House, Broomhouse Drive, Edinburgh, EH11 3XD, telephone 0131 244 4565).

All Scottish Government consultation papers and related publications (e.g., analysis of response reports) can be accessed at: Scottish Government consultations (http://www.scotland.gov.uk/consultations)

The views and suggestions detailed in consultation responses are analysed and used as part of the decision making process, along with a range of other available information and evidence. Depending on the nature of the consultation exercise the responses received may: indicate the need for policy development or review inform the development of a particular policy help decisions to be made between alternative policy proposals be used to finalise legislation before it is implemented

Final decisions on the issues under consideration will also take account of a range of other factors, including other available information and research evidence. While details of particular circumstances described in a response to a consultation exercise may usefully inform the policy process, consultation exercises cannot address individual concerns and comments, which should be directed to the relevant public body.

20 Handling your response

We need to know how you wish your response to be handled and, in particular, whether you are happy for your response to be made public. Please complete and return the Respondent Information Form which forms part of the consultation questionnaire enclosed with this consultation paper at Annex F as this will ensure that we treat your response appropriately. If you ask for your response not to be published, we will regard it as confidential, and we will treat it accordingly.

All respondents should be aware that the Scottish Government is subject to the provisions of the Freedom of Information (Scotland) Act 2002 and would therefore have to consider any request made to it under the Act for information relating to responses made to this consultation exercise.

Next steps in the process

Where respondents have given permission for their response to be made public, and after we have checked that they contain no potentially defamatory material, responses will be made available to the public in the Scottish Government Library and on the Scottish Government consultation web pages. You can make arrangements to view responses by contacting the Scottish Government Library on 0131 244 4552. Responses can be copied and sent to you, but a charge may be made for this service.

What happens next?

Following the closing date, all responses will be analysed and considered along with any other available evidence to help us inform our request to the UK Government for a Section 30 Order covering Equality legislation.

Comments and complaints

If you have any comments about how this consultation exercise has been conducted, please send them to Lesley Irving, Head of the Gender LGBT Equality & Violence Against Women Team: Address - Area 3-H (South), Victoria Quay, Edinburgh, EH6 6QQ, e-mail: [email protected]

21 Annex A

List of Public Authorities

Scottish Administration

The Scottish Ministers Keeper of the Records of Scotland Keeper of the Registrar General of Births, Deaths and Marriages for Scotland Scottish Court Service

National Health Service

A Health Board constituted under section 2 of the National Health Service (Scotland) Act 1978. A Special Health Board constituted under that section.

Local government

A council constituted under section 2 of the Local Government etc. (Scotland) Act 1994. A joint board within the meaning of section 235(1) of the Local Government (Scotland) Act 1973 A licensing board established under section 5 of the Licensing (Scotland) Act 2005, or continued in being by virtue of that section. A National Park authority established by a designation order made under section 6 of the National Parks (Scotland) Act 2000. Scottish Enterprise and Highlands and Islands Enterprise, established under the Enterprise and New Towns (Scotland) Act 1990.

Other educational bodies

An education authority in Scotland (within the meaning of section 135(1) of the Education (Scotland) Act 1980) The managers of a grant-aided school (within the meaning of that section) The board of management of a college of further education (within the meaning of section 36(1) of the Further and Higher Education (Scotland) Act 1992) which is a fundable body (within the meaning of section 6(2) of the Further and Higher Education (Scotland) Act 2005). In the case of such a college of further education not under the management of a board of management, the board of governors of the college or any person responsible for the management of the college, whether or not formally constituted as a governing body or board of governors. The governing body of an institution within the higher education sector (within the meaning of Part 2 of the Further and Higher Education (Scotland) Act 1992) which is a fundable body (within the meaning of section 6(2) of the Further and Higher Education (Scotland) Act 2005).

22 Police and Fire

The Scottish Police Authority The chief constable of the Police Service of Scotland The Scottish Fire and Rescue Service The Chief Officer of the Scottish Fire and Rescue Service

Other bodies and offices

Accounts Commission for Scotland Audit Scotland Board of Trustees for the National Galleries of Scotland Board of Trustees of the National Museums of Scotland Bòrd na Gáidhlig A Chief Officer of a Community Justice Authority Commissioner for Children and Young People in Scotland The Common Services Agency for the Scottish Health Service A Community Justice Authority Healthcare Improvement Scotland The Mental Welfare Commission for Scotland A regional Transport Partnership created by an order under section 1(1) of the Transport (Scotland) Act 2005 Scottish Children's Reporter Administration The Scottish Criminal Cases Review Commission Scottish Environment Protection Agency Scottish Further and Higher Education Funding Council The Scottish Board Scottish Natural Heritage Scottish Qualifications Authority The Scottish Social Services Council The Scottish Sports Council Scottish Water Skills Development Scotland Social Care and Social Work Improvement Scotland National Library of Scotland VisitScotland

23 Annex B

The Experience of Norway

In Norway, which was the first country to introduce a quota for women on boards, the proportion of women on boards has reached the 40% required by law. The Norwegian companies Act was passed in 2003 and imposes regulation on gender composition for a wide variety of company boards, public limited companies, state and local government owned companies as well as cooperative companies. The quota regulation for state owned and inter-municipal companies became effective in 2004, for new public limited companies in 2006, and for all public limited companies in 2008, for municipal and cooperative companies in 20097.

The baseline of female representation from which Norwegian public boards were starting from was considerably lower than is currently the case in the UK. In 2002, the year before the gender quota law came into force, the proportion of women on boards stood at 6%8. This indicates how relatively quickly quotas can make a significant difference to the numbers of women on boards.

The key lessons from the Norwegian are, firstly, sanctions are necessary to enforce compliance. Although no new sanctions were introduced because the law was an amendment of an existing one, it was clear that the threat of fines and company dissolution was necessary to enforce compliance: ‘The successful implementation of the quota was due mainly to sanctions, the toughest of which was the forced dissolution of noncompliant companies. When there were no sanctions in the initial phase, companies did not widely implement the policy on a voluntary basis’9.

Secondly, positive measures were also introduced to encourage companies to improve their gender representation. Several databases were established to which women could register and companies were able to search for potential candidates.

The Norwegian employers association created a training programme to which companies could send their employees to improve their skills.

Thirdly, quotas required the support of a wide political spectrum. The proposed legislation had the backing of a broad political alliance of centre government and left of centre parties.

Fourthly, it took a decade from the introduction of the law to achieve 40% female board members.

7 Exchange of good practices in gender equality. Women in decision making. Discussion Paper. European Commission. 8 Women on Board. The Norwegian Experience. June 2010. Available at: http://library.fes.de/pdf- files/id/ipa/07309.pdf 9 Women on Board. The Norwegian Experience. June 2010. Available at: http://library.fes.de/pdf- files/id/ipa/07309.pdf

24 Annex C

WOMEN ON BOARD: QUALITY THROUGH DIVERSITY

RESPONDENT INFORMATION FORM

Please Note this form must be returned with your response to ensure that we handle your response appropriately 1. Name/Organisation Organisation Name Scottish Natural Heritage

Title Mr Ms Mrs  Miss Dr Please tick as appropriate

Surname Wall Forename Melissa

2. Postal Address Scottish Natural Heritage Great Glen House Leachkin Road Inverness

Postcode| IV3 8NW Phone 01463 725000 Email [email protected]

3. Permissions - I am responding as…

Individual / Group/Organisation Please tick as appropriate 

(a) Do you agree to your response being made The name and address of your organisation available to the public (in Scottish (c) will be made available to the public (in the Government library and/or on the Scottish Scottish Government library and/or on the Government web site)? Scottish Government web site).

Please tick as appropriate Yes No

(b) Where confidentiality is not requested, we will Are you content for your response to be made make your responses available to the public available? on the following basis Please tick ONE of the following boxes Please tick as appropriate  Yes No Yes, make my response, name and address all available or Yes, make my response available, but not my name and address or Yes, make my response and name available, but not my address

(d) We will share your response internally with other Scottish Government policy teams who may be addressing the issues you discuss. They may wish to contact you again in the future, but we require your permission to do so. Are you content for Scottish Government to contact you again in relation to this consultation exercise? Please tick as appropriate  Yes No

25

Consultation Questionnaire Annex D

Question 1: Voluntary measures to increase gender diversity on public boards have been in place for some time. Why do you think they have not lead to the achievement of the 40% Diversity Delivers target?

Please provide further comments:

 We consider that the focus should be on actively encouraging women to apply to become Board Members. This may mean using less traditional means of reaching good candidates, particularly those who might not have thought of applying for Board positions before. Publicity inviting applicants for Board positions should state clearly the arrangements for payment and compensation. It should recognise that women are statistically more likely to have caring obligations and need to understand how Board membership could fit into their lives.

 SNH’s Board is appointed by Scottish Ministers and as such SNH is not able to control the gender balance, or degree of representation by different under-represented groups. The SNH Chairman, on behalf of the SNH Board Board, appoints Committee Members. For these appointments we apply best practice as used in the Scottish Government’s appointments process. SNH has an Equality & Diversity Policy and we monitor and report on applications and appointments to our Committees.

 In the past, it seems probable that the composition of interview panels in many sectors has not reflected wider society and this in itself may have led to a lack of diversity in appointments.

 With the recent trend to downsize the number of members on boards, and with many people being appointed to more than one public sector board, there are fewer appointments. Fewer appointments may mean those with previous experience have an advantage, and this may be a barrier to increasing the numbers of women on boards. Akin to this, Area or Local boards in public sector organisations used to be an entry point for people wishing to gain experience. There has been a move to disband these over the past decade for legitimate cost-saving reasons but this may also have removed a stepping stone for aspiring Board members.

26 Question 2: Do you think that before gender quotas are introduced to public boards, they should be given the opportunity to achieve a voluntary target for gender diversity on their board first? (Please tick Yes, No or Don’t Know)

Yes No Don‘t Know

Please provide further comments: for example, if no, why not?

 There was little support for the introduction of gender quotas on Boards.

 Early engagement with potential applicants is key and the opportunity for applicants to discuss informally the time commitment and responsibilities would be valuable.

 We feel that greater diversity on interview panels will be a useful first step in delivering greater diversity, including more equal gender balance, on Boards.

Question 3: If you answered ‘yes’ to question 2, what is a realistic timescale for boards to reach voluntary targets, after which quotas would be introduced?

Please provide further comments:

 5-8 years to allow for at least one (preferably two) rounds of recruitment.  There was little support for the introduction of gender quotas on Boards.

Question 4: What difficulties, if any, do you think there will be in introducing gender diversity quotas for public boards?

Please provide further comments:

 Across society in general, existing behavioural and cultural beliefs may make women less likely to apply for Board positions. For example, studies suggest that women are less likely than men to apply for positions where they do not have all of the desired criteria.  Quotas can be counter-productive as there may be a perception that some Board Members have not been appointed on merit. We are confident that the necessary caliber of female applicants can be achieved by focused recruitment advertising, and taking steps to eliminate barriers to application.  There is a strong perception that there is an element of ‘tokenism’ in targeting women through quotas.  Experience in other countries (e.g. Norway) suggests that quotas may not be an effective way of achieving gender balance in Boards without tough sanctions.

27 Question 5: What support, if any, do you think public bodies will require in order to introduce quotas effectively?

Please provide further comments:

 In order to encourage more applications from women to become Board Members, organisations need help to understand why women and other under-represented groups are currently not attracted to Board positions.  Organisations may need help to find the best ways to ensure that women are aware that public appointments exist, what the role entails and what the skills sets are. This must make clear that in recent years improvements have been made to working arrangements for Board Members including; payments to cover carer costs; timing of meetings to allow for logistical arrangements and other commitments; and the use of video conference to make attending meetings easier.  There is a need to significantly improve the appointments process for both men and women to make sure it really is fit for purpose and that appointments are made on merit.  Boards may wish to review timings of their meetings to make them as accessible as possible for people with caring responsibilities e.g. minimising evening meetings and requirements for overnight stays.

Question 6: Which bodies should quotas apply to? For example those with: Ministerial appointments only; Ministerial and non-regulated appointments; Neither Ministerial nor non-regulated?

Please provide further comments: No comments

Question 7: Which other public boards, if any, should be included? Please give reasons for your answer

Please provide further comments: No comments

28 Question 8: Which public boards, if any, should be exempt? Please give reasons for your answer

Please provide further comments: No comments

Question 9: Do you agree there should be quotas for people with other protected characteristics10 other than gender? (Please tick Yes, No or Don’t Know)

Yes No Don’t know

Please provide further comments:

 The majority of respondents felt that that introducing such quotas would be counter- productive. However, there may be a role for development positions on Boards which would allow people with protected characteristics to gain the skills and experience needed.  Boards should focus on recruiting and organizing their business in such a way as to address barriers to participation for those with protected characteristics. Specialist advice if appropriate should be available to assist Boards in meeting their equality duties.  Work should be focused on reviewing recruitment processes to make membership attractive to persons with protected characteristics. If this could be achieved it is more likely that such applications would bring a skill set to Boards which would fill gaps and result in appointments on merit.

Question 10: If you answered yes to question 9, do you agree with the Scottish Government’s staged approach to the introduction of quotas i.e. focussing on gender first? (Please tick Yes, No or Don’t Know)

Yes No Don’t Know Please provide further comments: No comments

10 The Equality Act 2010 makes it unlawful to discriminate against people with a ‘protected characteristic’ (previously known as equality strands / grounds). The protected characteristics are age, disability, gender reassignment, pregnancy and maternity, marriage and civil partnership, race, religion or belief, sex and sexual orientation.

Question 11: We have said that the percentage level for gender diversity quotas on public boards should be at least 40%, do you agree? YES, should be 40%; NO, should be greater than 40%, NO; should be less than 40%; or DON’T KNOW. (please tick Yes, No or Don’t Know)

Yes No Don’t Know

Please provide further comments: No comments

Question 10 – include a question on confidentiality?

Question 12: Who do you think should be responsible for enforcing quotas on public boards?

Please provide further comments: No comments

Question 13: Do you think some form of sanction should be imposed on public bodies if there is non-compliance? (please tick Yes, No or Don’t Know) Yes No Don’t Know Please provide further comments:

 Experience in Norway of introducing sanctions for companies that did not comply, suggests that there are pros and cons of sanctions and that other, more positive measures were also necessary to achieve the desired result. Experience in Norway also shows that sanctions were necessary to ensure compliance with quotas. Norway’s female representation on Boards baseline was much lower than currently in the UK.  As previously noted, SNH’s Board is appointed by Scottish Government and as such SNH is not able to control the gender balance of different under-represented groups.

Question 14: If you have answered ‘yes’, to question 13 what type of sanctions could be used? Please provide further comments: No comments

29 Question 15: Do you think gender diversity quotas should be extended to company boards? (please tick Yes, No or Don’t Know) Yes No Don’t Know

Please provide further comments: No comments

OTHER GENERAL ISSUES NOT COVERED ELSEWHERE

Question 16: Please provide details of any additional issues, not addressed in your other responses, that you think should be considered in relation to the introduction of gender quotas on public and company boards.

Please provide further comments: There was an objection to the idea of quotas, which was particularly strong amongst women respondents. There is concern that they can lead to tokenism and worse, a lack of confidence on the part of women as they may think that they are appointed because they are female.

BUSINESS REGULATORY IMPACT ASSESSMENT QUESTIONS

Question 17: Will there be any resource issues for public bodies to introduce gender diversity quotas on their boards? (please tick Yes, No or Don’t Know) Yes No Don’t Know

Please provide further comments: No comments

30 Question 18: Can the impact of any resources issues for public bodies be quantified using existing costing structures? (please tick Yes, No or Don’t Know) Yes No Don’t Know Please provide further comments: No comments

Question 19: Will there be any resource issues for companies to introduce gender diversity quotas on their boards? (please tick Yes, No or Don’t Know)

Yes No Don’t Know

Please provide further comments: No comments

Question 20: Can the impact of any resources issues for companies be quantified using existing costing structures? (please tick Yes, No or Don’t Know) Yes No Don’t Know Please provide further comments: No comments

31 Question 21: To help with the development of a Business Regulatory Impact Assessment, please provide any other information you think is relevant

Please provide further comments: No comments

EQUALITY IMPACT ASSESSMENT QUESTIONS

Question 22: The Scottish Government wants all women in their diversity to be represented on the boards of public bodies. Do you think there are currently barriers that especially impact on certain groups of women? (please tick Yes, No or Don’t Know)

Yes No Don’t Know

Please provide further comments:

 There may be a perception that Board membership involves out of hours working or that positions may have to be taken up in people’s own time.  Confidence is an issue for many: research shows that women tend to feel they need to meet all or most of the search criteria before applying for posts, whereas men tend to be more willing to have a go even if they don’t meet all of the criteria.  It could be argued that many Boards exclude not just women, but others who do not apply for Board positions, because of a negative perception of the worth of Boards. There are some views that Boards are merely ‘talking shops’. Instead publicity needs to be focused on the value of Boards and the experience of its members and the value and benefits this provides for all stakeholders.

32 Question 23: Do you think there is additional supporting action that could be taken to help certain groups of women overcome or mitigate these barriers?

YES, NO or DON’T KNOW (please tick Yes, No or Don’t Know) Yes No Don’t Know

Please provide further comments:

 SG could work with employers to encourage them to give time off to allow women to participate in Board positions. This should stress the advantages to the employer (e.g. increased skills for the employee and hence for the business).  There should be a review of how Board Member job and person specifications are written: They tend to be written to suit existing Board Members and so they tend to reinforce pre- existing assumptions about what ‘good’ looks like. A person specification may tend to focus on technical or professional indicators of knowledge, such as qualifications or membership of other bodies, rather than the ability to think around problems and see multiple perspectives, or actively build consensus.

Question 24: To help further with the development of our Equality Impact Assessment, please give any other information you think is relevant

Please provide further comments: No comments

33

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Published by the Scottish Government, April 2014

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