When Deutsche Bank Chief Executive Josef Ackermann said he hoped “someday” his board would be “more colorful and prettier, too,” it sparked new discussion about new regulations and even quotas. Angela Merkel opposes quotas for the number of women on boards, even though Germany has the poorest track record in Europe for female representation. France passed a law this year requiring companies with more than 500 employees and more than $68 million in sales to have women in 40 percent of the supervisory board positions within six years. Spain has the same requirement. Women remain a minority in the boardroom in the U.S. (15 percent) and the UK, where it has stagnated at 12.5 percent for the third year running.
It might be well for U.S. directors to consider that governance concepts that originate outside of the U.S. have a history of moving into the American mainstream rather quickly. Consider “Shareholder Say on Pay,” which began when U.K. cabinet minister Stephen Byers’ 1999 white paper suggesting that shareholders have a more active role in overseeing companies by requiring a “non-binding shareholder advisory vote on remuneration.” In 2002, the U.K. government adopted the Directors’ Remuneration Report Regulations, which made annual pay votes mandatory. By 2004, say on pay spread to continental Europe as the Netherlands made it a requirement, moving to Norway, Sweden, Spain, Portugal, Denmark, France, Germany and Australia before institutional investors in the U.S. filed shareholder proposals at 44 companies by 2007. Just last week, the SEC finalized the rules on say-on-pay and say-on-golden parachute rules.
Diversity is on the minds of American directors, according to the recent PwC’s Annual Corporate Directors Survey with 45 percent of them citing the difficulty in finding qualified candidates of diverse gender, race and with expertise in technology. A whopping 86 percent of directors say they use their own network of contacts to recruit new board members. Given the possibility of quotas for women on U.S. company boards and the new rules for greater transparency in describing the competencies of every board member, directors are well advised to look more broadly for board candidates or shareholders may propose their own candidates in proxy access.