In the main, the pledges exacted from corporations in various countries relate to increasing the number of women directors, often with a goal stated, such as 25 or 30 percent representation. Nonetheless, similar pledge programs could specify objectives regarding proportions of senior management positions women hold. The information technology industry, of course, could use both types of pledges to increase the number of female directors and the number of women in senior management.
In particular, countries and business groups operating in the shadow of but opposed to quota laws, such as in the United Kingdom, have resorted to pledge programs as an alternative. Overall, pledge programs have a mixed record: some have failed to gain traction, while others claim to have reached the goals they set for themselves.
The Dutch 2008 Talent to the Top pledge required public corporations to add women to their boards if the corporations subscribed to the pledge, which was termed “voluntary.”1 All 110 large corporations domiciled in the Netherlands signed the pledge.2 This included some very large entities such as Royal Dutch Shell, Phillips, Heineken, Reed Elsevier, and Unilever.3 The Dutch pledge program, and the corporate actions that ensued as a consequence, played a part in raising women’s representation in Dutch corporate boards of directors from approximately 7 percent in 2006 to approximately 16 percent in 2010.4 Since that time, however, the whirlwind of activities promoting adoption of quota laws across Europe, including in the Netherlands, and the actual adoption of laws by countries such as Germany, Belgium, France, and others have obscured attribution of further advances to the Talent to the Top program.
France adopted a quota law to take effect early in 2011, calling for publicly held companies to have 40 percent female directors by 2017. In the run-up to adoption of the law, French business leaders advocated a pledge program instead. For example, Claire de Montaigu, CEO of Leaders Trust, attempted to gain support for a pledge system requiring French companies to set objectives for addition of women directors and to stipulate that the companies would undertake to achieve those objectives. A newly chartered nongovernmental organization (NGO) would solicit the pledges. Afterward, the NGO would monitor companies’ progress toward the goals.5
Needless to say, the French adoption of a mandatory quota law superseded any push for a voluntary program involving pledges and monitoring, a quasi-hard soft law variant on a softer notion (wholly voluntary pledges). According to one poll taken at the time, 71 percent of French citizens favored the quota law alternative.6 Laurence Parisot, head of the powerful employers’ union MEDEF, spoke in favor of a quota law: “Improvement without a law is so slow that we cannot stay doing nothing.”7 Catherine Chouard, president of the French Equal Opportunities and Anti-Discrimination Commission, seconded Parisot’s comment: “[A quota law] is an excellent way to change mentalities. The law will be a first step to a ‘new way of life’ in companies.”8
In 2011 the European Union (EU) attempted to follow the Netherlands’ example when it requested large publicly held companies throughout Europe to voluntarily pledge to achieve the 30 percent level of female directors. Companies would stipulate to reach that objective by the end of 2015.
The proposed EU program failed miserably. After a year, only twenty-four corporations in the European Union had agreed to the pledge.9 Calling for quota laws, instead of corporate pledges, EU justice commissioner Viviane Reding explained why her allegiance had shifted: “One year ago, I asked companies to voluntarily increase women’s presence on corporate boards. . . . I regret to see that despite our calls, self-regulation so far has not brought about satisfactory results.”10
There are advocates for a pledge program in the United States. Inspiration for such a program in the corporate sphere comes from an unlikely source: the National Football League (NFL). The late Dan Rooney, an owner of the Pittsburgh Steelers professional football club (and later U.S. ambassador to the Republic of Ireland) chaired the NFL’s Committee on Diversity. The committee’s charge was to inquire as to why few, if any, of the head coaches or general managers in the NFL were African American when 70 percent of the football players were black.11 The committee drafted and the NFL owners adopted the so-called Rooney Rule, which requires each team in the league to pledge to include a minority candidate among the finalists for each head coaching and each general manager vacancy that arises. The signatories agree to conduct at least one on-site interview with one or more minority group finalists.
The Rooney Rule has met with success in solving the problem it addressed. Since 2003, when the NFL adopted the rule, the number of black coaches in the NFL has increased from 6 percent to 22 percent, and seventeen teams have hired African American or Latino head coaches.12 A good deal of that success, though, may be attributed to the Rooney Rule’s nature: although styled as a pledge program, compliance is not voluntary. Member teams must agree to the rule’s provisions. Failure to abide by what the teams pledged to do has consequences. The league office fined the Buffalo, New York, team $225,000 for an instance of noncompliance; the Detroit team was fined a similar amount.
In the United States, calls for a pledge program modeled after the Rooney Rule and aimed at increasing the number of women corporate directors have multiplied.13 Chapter 20 delves more deeply into the Rooney Rule and adoption of a version for publicly held companies in the United States. Whether the looming threat of a quota law (a remote possibility in the United States) and continued advocacy for one motivate recommendations for adoption of a Rooney Rule–type pledge program is a further question.
The many calls for an EU-wide quota regulation and various European states’ adoption of national quota laws made many business executives and government officials in the United Kingdom feel that they had a gun to their heads. A large subgroup of them opposed any quota law or regulation that would have applicability in the United Kingdom.
Nonetheless, in 2008 the United Kingdom’s Equality and Human Rights Commission had reported that “at the current rate of change it would take more than 70 years to achieve gender-balanced boardrooms in the UK’s largest 100 companies.”14 Despite ardent advocacy, the number of women on Financial Times Index (FTSE) 100 companies’ boards had increased only from 6.2 percent in 1999 to 9.4 percent in 2004 to 12.5 percent in 2010.15 Taking note of the lack of progress, in 2010 the British government pledged to “look to promote gender equality on the boards of listed companies.”
The British business minister and minister for women invited Mervyn Davies (Lord Davies of Abersoch, CBE), formerly chairman of Standard Chartered Bank, to review the situation and make recommendations. Thus was born the “Davies Report,” named after Mervyn Davies as chairperson of the committee that authored the report, which appeared in February 2011.
In the letter accompanying the report, Lord Davies sided with opponents of any quota law, albeit in euphemistic terms:
Some people told us that the only way we could make real change in increasing the number of women on boards was by introducing quotas. . . . Many other people told us that quotas would not be the preferred option as they did not wish to see tokenism [that quota laws would produce] prevail. On balance, the decision has been made not to recommend quota laws.16
Instead, Lord Davies’s committee’s report set out for implementation in the United Kingdom a ten-point recommendation list that may be characterized as a robust pledge program.17 Among the salient points are the following mandates (couched as recommendations):
The British program is a pledge program, termed “wholly voluntary.” Companies “should set out” diversity goals, “should aim” at 25 percent female composition of their boards, and “should report” on programs and results achieved with those programs. Given the self-description of the program and the various conditional phrasings used, the Davies gender equality corporate governance program might be concluded to be a voluntary one—but it is one with teeth. The Financial Reporting Council has amended the disclosure requirements applicable to public companies. The London Stock Exchange governance recommendations (the “Little Yellow Book”) have diversity “comply or explain” reporting requirements effectively tantamount to “comply” disclosure requirements. Those requirements subsume and render mandatory adoption of a program and pledging objectives the signatory company intends to meet.
On the fourth anniversary of their report and its recommendations, Lord Davies and his committee reported across-the-board compliance by large and not-so-large British public companies: 26.1 percent female directors at FTSE 100 companies and 19.6 percent at FTSE 250 firms.18 Lord Davies hailed “the near-revolution which has taken place in the boardroom” in the United Kingdom. Looking toward Continental Europe, Davies pronounced “the introduction of legally enforced quotas . . . unwarranted.” “The voluntary approach is working.” The president of the British Chambers of Commerce backed Davies: “There is no need for ‘overbearing governmental regulation.’”19
There were naysayers. One critic pointed out that companies were appointing women to non-executive board positions, leaving men dominating companies’ executive boards and suites. Another pointed out a fact obscured by celebrations over the 26.1 percent figure. In fact, the proportion of executive positions held by women stood at only 9.6 percent, even though women in the United Kingdom constitute 47 percent of the workforce and 53 percent of the university graduates.20 Naysayers to one side, Lord Davies and his committee announced a new objective for British publicly held firms: 33 percent by 2020.21
There are several reasons that a pledge program similar to the British one would probably not succeed in the United States. First is the strong libertarian streak running through not only the business community but all of American society. Second is the lack of any threat from without (imposition of quota laws) that undoubtedly galvanized the British efforts (the Davies Report and ensuing events). Third is the lack of any corporate officer to act as a point person for implementation, as board chairmen have in the United Kingdom. And fourth, related to the first, is the proclivity of British people to forestall even a hint of negative publicity, as compared to the ruggedly individualistic American zeitgeist that bends only to real, imminent threats (court orders, legislation, possible confiscation).
In England, as well in most other countries, different persons hold the position of board chair and the CEO position (in the United Kingdom known as the managing director, before the switchover to the more modern CEO parlance). Moreover, in Britain the board chair usually is intimately involved in convening board meetings, presiding at meetings, conducting board and individual director evaluations, reviewing committee personnel, initiating amendment of committee charters, and so on.22
The United States is one of the few nations, if not the only nation, in which the dominant public company arrangement is the reverse of that pattern. The U.S. practice is to combine the position of chair with the CEO position rather than to separate the posts. Eighty percent or more of the public companies in the United States followed this pattern until recently, when activist investors and good governance advocates have made separation of the offices central to their reform agenda. Nonetheless, combining the offices remains the most common practice in the United States. In fact, in an exercise of megalomania, many U.S. CEOs insist on three titles: board chair, CEO, and president.23
The highest calling for a board of directors is to monitor and evaluate the performance of the chief executive and, if necessary, remove a CEO deemed misguided or underperforming. Critics ask how a U.S. board would be able to do that when the person charged with convening the board and presiding at the meeting would be the very person, that is, the CEO, whose removal is sought.24
But that riddle aside, another factor that might result in the British pledge program being “lost in translation” is the difference between the two views of the board chair position. As has been seen, the board chair has a number of duties and plays a hands-on role in the United Kingdom, regardless of who holds the office. By contrast, in the United States, under states’ laws, the position of chair has no legal status other than what the company’s bylaws state (usually little if anything). The position of chair thus is an empty vessel into which various companies pour various things, but generally not very much.25 Quite often, if the current CEO does not hold the board chair position, the corporation’s board “kicks” the former CEO “upstairs,” where he or she acts as a figurehead or, at most, as a father confessor figure to the current CEO.
The point of all this discussion is that under the typical U.S. arrangement, no one except the CEO is occupying the bully pulpit. Under the U.S. schematic, CEOs have a myriad of tasks assigned to them. Most (many) CEOs would have too full of a dance card to be able to assign a high priority to recruitment of female directors and advancement of women managers. It is highly unlikely, then, that many U.S. corporations would have a focal point for administration of a pledge program high enough in the hierarchy of managers in the way U.K. and other nations’ corporations would.
The English Bill of Rights is said to “live in the hearts and minds of English men.” Hence there is no need for enactment of a written statement of liberties. When asked what prevents, for instance, the majority in the society from rounding up all the red-haired, freckled persons and placing them in internment camps in Cornwall, all knowledgeable English have an answer. “It is just not on,” they unvaryingly reply. A similar retort would be given to more realistic hypotheticals as well, involving, say, free exercise of religion, freedom of speech, freedom from racial and gender discrimination, and so on.
By contrast, U.S. institutions and individuals display a more pronounced individualist trait, some would say a rebellious one, even a swashbuckling one at times. They often do not feel bound by any principle that is not written down or enacted into positive law. Individual corporate boards and CEOs would not sign a voluntary pledge, or, if they did so, would not feel bound by it, especially if the phrasing were similar to that used in the Davies Report: that companies’ boards “should aim,” board chairs “are encouraged,” companies “should draft” programs and reports, and so on.
Another salient difference between the United States and the United Kingdom is the effect of adverse publicity to which a company would be subjected if it refused to sign a widely accepted oath or pledge. The effect in Britain usually is severe, leading companies and individuals to be far less prone to get out of line in the first place. One can theorize multiple reasons for this phenomenon. The corporate and publishing worlds in the United Kingdom are very centralized, focused on the City (the original London of one square mile, which now contains the financial district) and Fleet Street, which adjoins the City, epicenters for the entire country of 64 million plus. Members of the City’s financial community and the press can and will quickly subject a nonconformist to embarrassment and censure by its peers. Business and corporate reporting is more detailed than in the United States. Business editors and reporters do not hold back on criticism of noncompliance or of self-regulatory efforts.
In the United Kingdom, then, “public censure or adverse publicity is quickly generated and quickly heeded.”26 By contrast, the United States is not so centralized, sprawling from Portland, Maine, to San Diego, California, and from Anchorage, Alaska, and Seattle, Washington, to Miami, Florida. U.S. companies are much more likely to risk adverse publicity, weathering the storm and waves of public censure such as those that would result from non-adherence to pledges.
On October 29, 2015, the Davies Committee released its five-year review a year early, pronouncing the British pledge program a runaway success.27 Among its highlights:
The Davies Report presented comparative statistics as “evidence to show that the voluntary regime is working,” and by inference that mandatory quota rules are unnecessary. With 26.1 percent reported, “the UK is sixth in Europe behind Norway [35.1 percent], Sweden [32.6 percent], France [32.5 percent], Finland [29.4 percent] and Belgium [28.5 percent].”31 Six European countries have quota laws: Norway (40 percent), Spain (40 percent), France (40 percent), Belgium (33 percent), Italy (33 percent), and Germany (30 percent).32 The United Kingdom is not far behind, and with the Davies 33 percent pledge it will surpass some nations with quota laws. “Let’s prove to them that this [a voluntary pledge program] is a better way to do it,” said one FTE 100 company chairman.33
At the risk of being criticized the way Mozart was (“too many notes”), I will risk a few more comparative numbers from the Davies Report (“too many numbers,” as an editor of a business magazine told me):
While a quota law or regulation seems unworkable, by contrast, a pledge program may work in the United States, both at the director level and at the senior management level. Any program advanced would have to contain modifications, taking into account the issues raised above, such as who would serve as a focal point for monitoring and compliance in individual corporations. More importantly, to lend moral force to the pledge program and to the need for compliance following the pledge, the industry’s leaders would have to join in spearheading the effort. A substantial number of companies within a given industry would have to back business leaders in implementing the pledge program. The latter could prove difficult, given the variety of companies, the diversity in what those companies do, and the numbers of mavericks who populate information technology, especially as one descends downward through the industry’s ranks.