The House of Commons decided, yesterday, pursuant to Article 6 of Protocol (No 2) on the Application of the Principles of Subsidiarity and Proportionality, to send to the Presidents of the Council, the European Parliament and the Commission a Reasoned Opinion stating
that the draft Directive on improving the gender balance among non-executive directors of companies listed on stock exchanges and related measures does not comply with the principle of subsidiarity, for the reasons set out in Chapter 1 of the Twenty-third Report of the European Scrutiny Committee. During the debate Bill Cash made the following interventions:

The Parliamentary Under-Secretary of State for Skills (Matthew Hancock): I beg to move,

That this House considers that the draft Directive of the European Parliament and of the Council on improving the gender balance among non-executive directors of companies listed on stock exchanges and related measures (European Union Document No. 16433/12 and Addenda 1 to 3) does not comply with the principle of subsidiarity for the reasons set out in Chapter 1 of the Twenty-third Report of the European Scrutiny Committee (HC 86-xxiii); and, in accordance with Article 6 of Protocol No. 2 of the Treaty on the Functioning of the European Union on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.

The motion is in the name of my right hon. Friend the Secretary of State for Business, Innovation and Skills. This debate gives the House a welcome opportunity to discuss gender balance among non-executive directors of listed companies, and to decide whether to send a reasoned opinion on the European Commission’s recently published proposal, improving the directive, to the Presidents of the EU institutions. In short, we are here to debate women on boards.

The aim of the draft directive is to increase substantially the number of women on corporate boards throughout Europe. The directive sets an objective of ensuring that, at a minimum, 40% of non-executives on the boards of listed companies are female by 2020. It aims to do that by ensuring that companies have transparent, gender-neutral appointment processes in place for their boards. Member states would be required to have a range of sanctions in place for companies that failed to do that. For companies that are listed, over which public authorities have a dominant influence, the proposed objective is to reach a minimum 40% representation by 2018.

(…)

Mr William Cash (Stone) (Con): The first question for consideration in this reasoned opinion debate is, in a nutshell, whether the Commission will have to reconsider its proposal, and that issue turns on whether there will be sufficient opinions representing one third of all the votes in national Parliaments—on the basis that each Parliament has two votes. The real question is whether we will really get that. Of course, if we do not, the question that follows is: what will happen? Some believe that the principle of subsidiarity ought to be applied, but there is also the question of whether we should refuse to accept it—but that is for another day.

Secondly, there is a question about whether the directive will achieve its target of 40% representation of female non-executive directors and—this has not been mentioned yet—30% of all directors on the boards of publicly listed companies by 2020, or 2018 in the case of listed public undertakings.

Furthermore, there is the question of the exemption for small and medium-sized enterprises—I have not heard that mentioned either—and for companies whose work forces have fewer than 10% female employees.

Thirdly, where national measures have already been introduced in some countries with a view to increasing the representation of women on corporate boards, companies need not apply the new recruitment and selection requirements, but will be required to do so from 2018-20 if they have not reached the 40% target. I put that on the record because, as far as I am aware, none of those three points has been made in the debate so far.

In the interest of brevity, I will simply say that the questions concerning breaches of the principle of subsidiarity are set out in the draft reasoned opinion and I do not need to repeat them. I would like to put several questions to the Minister, but, in order to ensure that we get through what we have to get through in the time allotted, I shall write to him with the questions that the European Scrutiny Committee would like answered, and he can reply to us. I do not therefore have to go through them all now—I would not have time anyway.

I shall make only one more point. Will the Minister tell us whether—and, if so, to what extent—the Government plan to make use of the reasoned opinion in the Council negotiations on the proposal? With that I shall conclude, but I shall be writing to the Minister and look forward to his considered response.

(…)

Matthew Hancock: With the leave of the House, Madam Deputy Speaker, I will respond briefly to all the points raised. First, I shall deal with the last one by congratulating my hon. Friend the Member for Skipton and Ripon (Julian Smith). I do so not least because this morning my wife and I attended the three-month scan of our new baby—we did so together, of course. I can understand why the Whips are looking worried about need for paternity leave coming down the track.

I will make three quick points. I think that the whole House has recognised the first of these, but I wish to put it in stark terms. The UK has had the fastest rise in the number of women on boards in the EU, bar three countries. Our rise has been faster than that of Germany, the Netherlands and Spain; we have been faster than all but three of the 27 member states.

On the point about whether it is good business to have women on boards, the evidence is very clear. The Bundesbank evidence was cited and I have read it in detail. It was analysis of the impact on risk, but it omitted the banks that had been rescued because they had been too risky—that is a bit like looking into the risk of the British banking system but omitting RBS. So it is a partial report, but the evidence is uncontroversial.

Finally, I come to the point raised by the Chairman of the European Scrutiny Committee. The rules are clear: if a third of member Parliaments cite a reasoned amendment and reject the proposal, the Commission must consider again. As far as we know, eight member Governments and Parliaments are against, which is just under a third, as there are 27 members, and about a third of member states are yet to be clear in their position. If this motion goes through tonight, that eight will rise to nine. So I have some confidence that he will be happy with the outcome of the process and that we can ask the Commission to look again at this proposal. I commend the motion to the House.

Question put and agreed to.

Resolved,

That this House considers that the draft Directive of the European Parliament and of the Council on improving the gender balance among non-executive directors of companies listed on stock exchanges and related measures (European Union Document No. 16433/12 and Addenda 1 to 3) does not comply with the principle of subsidiarity for the reasons set out in Chapter 1 of the Twenty-third Report of the European Scrutiny Committee (HC 86-xxiii); and, in accordance with Article 6 of Protocol No. 2 of the Treaty on the Functioning of the European Union on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.