Yesterday afternoon, EU Commissioners postponed plans to vote to impose rules on listed companies which would force them to reserve 40% of their board seats for women.
The reason for the delay, one way or another, is that those promoting the vote were not about to win it. So pragmatism prevailed.
Of course, as with so much of the equality and diversity agenda, whether you’re cheered by this news or rather disappointed is a deeply political matter at heart. The question of the extent to which it should also be a legal matter is, I would suggest, equally controversial.
From a moral standpoint, a desire for a fair society is a noble goal, but the question of what is and is not fair in any given situation is highly debateable. The law is used to this: many laws are framed around what is or is not ‘reasonable’ in particular circumstances, sometimes objectively, sometimes subjectively. But lawmakers have long shied away from trying to lay down overly prescriptive rules which would say that X is definitely reasonable, whereas Y is definitely not.
In an analogous way in the current situation, Company law requires directors to act in good faith in the way they believe would be most likely to promote the success of the company for the benefit of its members as a whole. The law is not interested in having some judge substitute his thoughts on what is appropriate here, its only interest is to ensure that all relevant factors are taken into account.
Not only is this legally the right way about, it is also rational. Companies are in business to make money, and one would think therefore that the imperative of the market would be more than sufficient incentive for directors to deploy their duties correctly.
So why then the need for quotas, what is the point?
When vacancies arise at board level, the most any of us can ask is that the incumbents take their time to select the best new candidates, whether they be men or women. If that is not what is happening already, then those at the helm of our grand public companies are already at fault and they can be held to account, but I do not see anyone rushing to suggest that that is the case. What if, therefore, the opposite is the case – that in fact boards are selecting the best new candidates when vacancies arise; that the pool of suitably qualified and willing candidates is small and that a large number of that small pool happen to be men. Then a change in the law to impose a rigid quota of female appointees is perverse; the rational is replaced with the irrational; and the duty to do what is best is replaced by the duty to do what is second best. Is that what we mean by fair?