In March 2011, Viviane Reding, the Vice-President of the Commission, launched a call for action, asking publicly listed companies in the EU to pledge to increase the number of women on their boards. The call gained support from representatives of several EU member states and the European Parliament, which said that it would ask for EU legislation if companies did not make sufficient progress voluntarily.

Although, 12 months on, only 24 companies have signed the EU pledge, several member states took action at national level in 2011 to address the issue of gender diversity in the boardroom, including legislative measures in Belgium, France, Italy and the Netherlands.

However, the Commission is not satisfied with the steps that have been taken to date. A progress report shows that just one in seven board members at Europe's top firms is a woman (13.7%) and so, as expected, the Commission has launched a consultation that could pave the way to the introduction of EU-wide legislation.

The consultation includes questions on:

One of the most interesting questions is about what sanctions should apply to companies that fail to comply with whatever rules may be introduced. There are a number of possible approaches. For example, in Norway, which has compulsory quotas, companies that do not comply face hefty fines and possible liquidation. In the Netherlands, companies must either comply with quotas or explain why they have not complied. Other countries, such as Belgium, have a rule that any appointment of a man as a director will be void if it is made at a time when the quota of female directors is not met.

The consultation is open until 28 May 2012 (see box "Web links"). The Commission will take a decision on further action later this year.

In contrast to the EU findings, a recent report by the steering committee of the Davies report, complemented by a Cranfield University report, shows that the voluntary approach to increasing female representation on boards, kick-started by the Davies report, is making a difference in the UK (see box "Web links").

The reports found that:

This is being hailed as positive progress, and, if the current pace of change continues, the UK is set to achieve Davies' recommended target of 25% female board representation by 2015.

The UK government is therefore not proposing to introduce mandatory quotas for female directors at this stage, although it has not ruled out introducing them in the future. Instead, it will stick with the voluntary approach, together with changes that have been made to the UK Corporate Governance Code to require companies to disclose their board diversity policies and objectives for financial years beginning on or after 1 October 2012 (although early compliance is encouraged) (see News brief "Women on boards: progress and prescription", www.practicallaw.com/3-509-5020).

Lord Davies states that priorities over the next year should be to work towards:

Also, a response is expected in the spring from the Department of Business, Innovation and Skills to its consultation on narrative reporting, which included recommendations that companies be required to disclose in their annual reports data on the number of women in their workforce, in senior executive positions and on the board (see News brief "Narrative reporting: towards a new framework", www.practicallaw.com/1-508-4536). If those changes are made, they are expected to apply from April 2013.

Both the EU and UK reports highlight that a bigger than ever increase in the proportion of female directors has been achieved over the last year, no doubt because of the high level of public debate on this issue. High profile statements from 10 Downing Street have added to the pressure, and, as Lord Davies points out, institutional investors are "increasingly becoming one of the most active and vocal groups championing women on boards".

Unlike the UK, the Commission is not content to wait and see whether this progress will gain momentum of its own accord. Even so, the EU consultation will not inevitably result in quotas, and there are a number of possible outcomes. A continuation of the voluntary approach is likely to be viewed as preferable to quotas by many stakeholders. Some companies have broader diversity targets, not necessarily focused solely on gender diversity. Others will be keen to avoid rules that result in women being made directors solely to fulfil the quotas rather than on merit.

Whether or not we end up with quotas, it is clear that companies are likely to benefit from taking measures now to ensure a sufficient number of talented females come up through the ranks to be board candidates in the future.