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More women on top? A new “Danish model” for women on boards is on its way

[Brussels 10 May 2012] At a press conference on 03 May the Danish government revealed a plan for promoting more women in management and boards. The proposal for a new law holds a number of legislative changes targeted at both the public and the private sector.

The basic idea behind the Danish model is simply that it must work! There must be real progress for gender equality in decision-making n Denmark. The law will apply to the 1,100 largest companies, which will be obliged to set targets to raise the number of the underrepresented sex on their boards - typically women.

Minister for Gender Equality and Religious Affairs Manu Sareen said about the “ambitious Danish model”: “We draw our inspiration from all over Europe, but our model in particular will resonate and set a fashion in other EU countries.”

”We are convinced that it is much better that the companies set the binding targets themselves, rather than quotas coming from us top-down. The target can vary from company to company – according to the real conditions in the relevant industry”, says Business and Growth minister Ole Sohn.

The model consists of four elements:

  • The 1,100 largest companies are to provide targets for more women in executive and board positions.
  • A specific recruitment plan must be implemented at all levels of management.
  • In its annual report the company should explain the numbers and reason, if the objective is not met. If this justification does not appear in the annual report, the company will be fined. But Equality Minister Manu Sareen emphasises that dialogue with companies is the key.
  • Finally, all state enterprises regardless of size will set targets and develop a policy to get more women in management.

In a European context there are more ambitious models in place already with Norway as the front-runner with a quota of 40% women board members in listed companies. The Norwegian model has inspired variations of quota legislation in several European countries but also given rise to much debate about the use of compulsion vs. encouragement and the impact the different strategies have on women as well as companies.

A model based on voluntary quotas is no novelty in itself. In the UK a
government-backed report last year set a target for a minimum of 25% female board representation in the FTSE 100 by 2015 to be achieved by voluntary means.

The issue of quotas has been a hot potato in Danish political debate for years. Not surprisingly, the new regulation does not adopt a quota system. However, the proposal does represent a step forward as concrete targets for raising women’s share of management and board positions are now a concrete part of policy. The political debate is no longer limited to positioning for or against quotas; the question is no longer “if” but “how”. The efficiency of the law depends on the implementation tools and the severity of sanctions. At this point the proposal does not reveal the size of the fines. If they turn out to be negligeable the Danish Model will be toothless.

The bill will be put forward during the next session in autumn.

Sources:

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