TABLE OF CONTENTS Foreword 2 Summary of Corporate Governance Codes 6 North America Canada 16 United States 18 Latin America Argentina 24 Brazil 28 Colombia 32 Mexico 34 AfricA Morocco 40 South Africa 44 Europe European Union 52 Belgium 58 France 62 Germany 66 Italy 70 Netherlands 76 Norway 78 Spain 82 United Kingdom 86 Middle East Middle East 94 Egypt 96 Israel 98 Jordan 102 Tunisia 103 AsiA China 106 Hong Kong 108 Indonesia 112 Japan 118 Philippines 122 Singapore 126 Australia and New Zealand Australia 132 New Zealand 134
Foreword Building on the success of our first edition, we are pleased to present the second edition of Breaking the Glass Ceiling: Women in the Boardroom, a comprehensive, global survey of how different countries are addressing the issue of gender parity on corporate boards. In the 2012 report, we examine the legislative, regulatory, and private sector developments and trends in 30 jurisdictions. We included updates to the 13 jurisdictions covered in the inaugural edition, and added 17 new jurisdictions in Asia, South America, Africa, and the Middle East. In certain jurisdictions, change is mandated; in others, change is encouraged; and in still others, change is dependent on whether industry will respond. We offer insights into how differences in culture, history, and societal norms, as well as the varying degrees of government involvement, affect representation of women on boards. Overall, the wide range of representation of women on corporate boards from one country to another is subject to a variety of factors including different legislative and regulatory regimes, cultural perceptions of women, and level of economic development. Following is a snapshot of our findings. Europe Still Leads the Way In 2011, the European Commission launched a number of initiatives to encourage Member States and businesses to consider gender diversity on corporate boards and called on companies listed in the European Union (EU) to introduce specific measures to enhance representation of women on boards by March 2012. Belgium, Norway, Sweden, Spain, Iceland and, most recently, France and Italy are among the European countries that have adopted affirmative action measures mainly quotas to promote gender parity. Other countries, such as Germany, have started discussions on this issue. The Netherlands is considering a bill expected to come into force in 2013 requiring 30 percent representation by women on corporate boards. In the United Kingdom, the 2011 Davies report provided recommendations on what government and businesses can do to increase the percentage of women on boards, and developments since its publication indicate some improvement. All indications are that Europe will remain the leader on this issue for the immediate future. The United States and Canada have had only marginal growth in the percentage of women on boards since the 2011 report. While efforts by governmental entities are still preliminary, investor and advocacy groups are driving initiatives to increase representation by tracking data, developing databases, and establishing networks for women professionals. In Canada, the federal government announced a policy initiative to establish an advisory council to promote women s representation on boards. However, in the United States, the legislature and relevant regulatory bodies do not appear inclined to take more assertive measures to tackle this issue. Australia has had a dramatic increase in women s representation on boards, from 14.2 percent in 2010 to 24 percent in 2012, as a result of amendments to the corporate governance codes that now impose strict disclosure requirements for listed companies. Although New Zealand has not had any increase in women s participation on boards since 2008, there are some efforts to change the situation, notably proposed amendments to the NZSX/NZDX Listing Rules. In Argentina and Brazil, the level of gender equality in high-ranking public positions including the presidency is not reflected on corporate boards. Recent legislation and case law in Argentina indicate an initial shift to greater government involvement in gender equality issues in the private sector. In Brazil, the government is considering a bill requiring Brazilian state-owned entities to have at least 40 percent women directors. Colombia and Mexico lead Latin America with the highest percentage of women directors, although there is still significant opportunity for improvement in both countries. In most of the Asian countries we reviewed, with the exception of the Philippines, the percentage of women on boards is low. In Indonesia, women in high-profile corporate positions are the exception rather than the rule and the government is working on specific legislation to promote gender equality generally. In 2010, the Hong Kong Stock considered changes to the Code on Corporate Governance Practices and the Listing Rules that would increase the turnover of board seats and thereby provide more potential opportunities for women directors. While recent legislation in Mainland China calls for an increase in women s participation on boards of both public and private companies, the legislation is largely advisory due to the lack of enforcement. Japan s government has set targets to increase participation by women in leadership positions in a variety of areas by 2020, including 10 percent of management and senior positions in companies. The Philippines is among the countries with the highest percentage of women on corporate boards and has strong legislation promoting and protecting women s rights. In Singapore, 2
Breaking the glass ceiling: women in the boardroom nongovernmental organizations play an important role in advocating for greater gender equality in the workplace and boardroom. Among the countries in the Middle East, Israel stands out with a particularly high percentage of women participating on corporate boards. Women represent 44 percent of directors at stateowned entities in Israel, largely as a result of quotas, whereas public companies, which are not subject to specific quotas, have 16.9 percent female directors. In Egypt, women represent 6.7 percent of directors; however, with the ongoing political transition it is unclear whether Egyptian women will continue to have a meaningful presence in politics and the economy. In Jordan, 14 percent of directors are women, although having strong connections to powerful families is a key factor in their appointment. Generally, Tunisia outperforms many Arab countries in equality between men and women; however, there is still room for improvement as only 5.3 percent of directors are women. In Africa, there are also other signs of progress with regard to gender parity. South Africa has made strides in increasing the number of women on boards to15.8 percent, although the number of women on the boards of stateowned entities far surpasses those of listed companies. While gender parity in Morocco is weak, there have been recent reforms by the legislature to improve women s civil and economic rights, as well as various public-private initiatives to address gender inequalities. A Variety of Strategies to Fit Local Dynamics The 2012 report highlights in particular the variety of approaches taken in various countries to increase the number of women on corporate boards. These strategies include legislative measures such as quotas and voluntary targets, corporate governance codes and stock exchange listing rules requiring disclosure and recommending gender diversity among selection criteria for directors, and mentoring and educational programs. Legislative Mandates Remain Controversial In the past few years, several countries have passed legislation mandating female board representation. In 2011, France passed legislation requiring that women comprise at least 40 percent of boards for both listed and non-listed companies within the next six years. As of June 2012, the number of female nonexecutive directors at France s top listed companies has already increased to 23.5 percent. Many other countries are considering similar measures. Brazil and Norway are considering bills that would also establish quotas for women directors; although in certain countries, like Brazil, the quotas are limited to state-owned entities. Certain countries have created non-binding quotas or targets for female representation on boards that companies can choose to follow. In addition, the types of sanctions imposed with regard to mandatory legislative measures vary widely from comply or explain requirements, to nullification of board appointments, to financial sanctions. In Belgium, at least one-third of the directors must be a different gender than the others. If this is not met, the next director appointed must be of the minority gender or the appointment will be null. Israel requires public companies to appoint at least two outside directors, and where all the board members are the same gender, one of the appointed outside directors must be of the opposite gender or the company will face financial sanctions. Non-compliance with Norway s quota requirements by existing companies could result in liquidation through a court ruling and new companies could be denied registration. Corporate Governance Codes and Listing Rules May Provide Most Immediate Leverage There is also a trend to use corporate governance codes and stock exchange listing requirements to promote gender diversity and potentially create greater opportunities for women board members. Certain listing requirements and corporate governance codes include direct references to gender or diversity among possible selection criteria for board members, and require companies to disclose in annual reports whether they maintain a diversity policy or, in some cases, the gender composition of their boards. Other provisions may indirectly help increase the number of female representatives on boards by providing more opportunities for new candidates to join. For example, the Hong Kong Stock in 2010 proposed three key changes to the Code and Listing Rules: (i) placing a limit on the number of independent, non-executive positions that an individual may hold; (ii) requiring the inclusion of a certain number of independent, non-executive positions on a board; and (iii) requiring a shareholders vote in order to retain an independent non-executive board member for more than nine years. Such provisions create greater turnover and 3
open new positions, leading to greater access for women directors. The chart on the following pages summarizes the relevant provisions of the corporate governance codes for the countries included in the 2012report. The Private Sector Remains Critical In many countries, industry associations, business schools, and non-governmental organizations advocate for and develop initiatives to increase representation of women on corporate boards. The PanAmerican Institute for High Business Direction (PAIHBD), a private university in Mexico and one of the leading business schools in Latin America, has a research center for Women in Senior Management that conducts research, issues publications, and holds seminars and networking events on representation of women on boards. Additionally, PAIHBD collaborates with business schools in other Spanish-speaking countries to host events for women directors. Similarly, women s associations in a number of countries are developing databases to keep track of qualified women candidates and providing networking, mentoring, and educational opportunities. For instance, the New Zealand Institute of Directors established an annual Mentoring for Diversity program, offering mentorship for women directors by chairmen and senior directors. Industry groups have also collaborated to implement voluntary codes of conduct to promote gender diversity on corporate boards. Notably, in July 2011, 20 leading executive search firms in the United Kingdom announced a new Voluntary Code of Conduct on gender diversity, which includes taking affirmative steps to promote gender diversity at various stages of the recruitment process such as succession planning, identifying women candidates, and supporting candidates to help them through the process. Conclusion The issue of gender parity on corporate boards is gaining increasing attention and priority in a number of countries. In some, work must first be done to establish stronger rights for women and challenge historical societal norms. In others, lethargy, inertia, and the status quo must be addressed before meaningful progress can be made. The momentum is building not only in Europe, but in the Middle East, Africa, South and North America, and Asia. And advocates are using a variety of strategies to address the issue given the local context and dynamics. One of the more effective and discrete is to utilize corporate governance codes and listing rules to impose mandates or at least put pressure on public companies to address the issue. Since its founding, our firm has placed a high value on diversity. Women serve in a number of leadership positions in our firm and diversity touches upon all aspects of our business. We have been recognized with Gold Standard Certification from the Women in Law Empowerment Forum in 2011 and 2012, which recognizes that women comprise a significant portion of our leadership structure and are top earners. We welcome your feedback on the 2012 report. It is our hope that this edition sparks ideas and discussions about possible strategies and initiatives. We will continue to add new jurisdictions, in addition to updating the countries covered to date. We look forward to reporting on future efforts to increase women s participation on corporate boards globally in the upcoming year. Tara Giunta, Partner Lianne Labossiere, Associate Paul Hastings (Washington, D.C.) Editors 4
Breaking the glass ceiling: women in the boardroom 5
Summary of Corporate Governance Codes Country Governance Code Implementing Body Nature of Requirement Argentina Established by General Resolution No. 516/2007 of the Comisión Nacional de Valores Voluntary. Listed companies must reply or explain compliance in annual reports. Australia Corporate Governance Principles & Recommendations issued by Australian Stock Corporate Governance Council Belgium Belgian Company Code issued by Belgian Committee on Corporate Governance Mandatory. Pecuniary sanction and nullification of appointments made in violation of the code. Brazil Corporate Governance Code published by the Brazilian Institute of Corporate Governance (Instituto Brasileiro de Governança Corporativa). Business association Voluntary Corporate Governance Code published by the CVM (Brazilian Securities and Commission) Canada National Policy 58-201 adopted by Canadian Securities Administrators Voluntary China Code of Governance for Listed Companies issued by China Securities y Commission and State Economic Trade Commission Required for Listed Companies Colombia -- -- -- Egypt Code of Corporate Governance adopted by the Egyptian Institute of Directors of the Ministry of Investment European Union Green Paper on Corporate Governance, dated April 5, 2011, solicited Member States opinions regarding items concerning corporate governance, including gender diversity on corporate boards. However, no governance code has been adopted. -- -- 6
Breaking the glass ceiling: women in the boardroom Provision Regarding Gender Diversity Quotas Existence of Board Term Limits Definition of Independent Directors Listed entities must: (1) establish and disclose a diversity policy; (2) disclose gender diversity objectives and progress; and (3) disclose the proportion of (a) women employees in the whole organization, (b) women in senior executive positions, and (c) women on the company s board. -- -- The board should consider several factors when determining the independent status of a director, including whether the director: (1) is a substantial shareholder of the company, (2) is employed or has previously been employed in an executive capacity by the company, and (3) has a material contractual relationship with the company. At least 1/3 of the directors of listed companies must be of a different gender than the other board members. Annual reports must discuss efforts made toward meeting minimum requirement of 1/3 of board members from a different gender. Yes -- -- -- -- -- A member is independent if the individual has no direct or indirect material relationship with the issuer (i.e., a relationship that could reasonably interfere with the exercise of a member s independent judgment). 7
Country Governance Code Implementing Body Nature of Requirement France Corporate Governance Code of Listed Corporations adopted by AFEP-MEDEF Business association Voluntary. Companies must comply or explain non-compliance in annual reports. Germany Corporate Governance Code adopted by Government Commission on the German Corporate Governance Code Voluntary Hong Kong Code of Corporate Governance Practices adopted by The Stock of Hong Kong Limited Voluntary Indonesia Code of Good Corporate Governance adopted by the National Committee on Governance Voluntary Israel -- -- -- Italy Italian Corporate Governance Code adopted by Italian Stock Japan Regulations for Listing issued by the Tokyo Stock Required for Listed Companies Jordan Corporate Governance Code adopted by the Jordan Securities Commission Mexico Corporate Governance Code drafted by the Committee on Corporate Governance. Business association Voluntary Morocco Code of Good Practice on Corporate Governance adopted by the National Commission on Corporate Governance 8
Breaking the glass ceiling: women in the boardroom Provision Regarding Gender Diversity Quotas Existence of Board Term Limits Definition of Independent Directors For companies with securities traded on regulated market, each board should consist of at least 20% women within three years and at least 40% women within six years. Yes -- To remain independent, a director must not have been a director for more than twelve years. When appointing management boards, supervisory boards shall respect diversity and aim for appropriate consideration of women. Supervisory boards shall specify concrete objectives regardingtheir composition, which shall include an appropriate degree of female representation. -- -- Supervisory board members must be independent, which is determined after considering such factors as material compensation from the company within the past two years and holding 10% or less of the company s shares. -- -- Yes. Non-executive directors should be appointed for a specified term. If an independent, non-executive director serves more than nine years, his or her further appointment should be subject to a separate resolution for shareholder approval. In identifying candidates for directors, shareholders shall consider the gender of the candidates, among other things. -- -- -- -- -- -- Independent officers may be an outside director or auditor. -- -- -- Independent members are not tied to the company or any of its upper executive management, affiliate companies, or its external auditors by any financial interests or relationships other than his or her shareholding in the company, that may be suspected to bring that member benefit. Management boards should be composed of members who, among other things, provide diversity including with respect to gender balance. -- -- -- 9
Country Governance Code Implementing Body Nature of Requirement Netherlands Corporate Governance Code adopted by the Corporate Governance Code Monitoring Committee New Zealand NZSX/NZDX Listing Rules issued by New Zealand Stock Norway Code of Practice for Corporate Governance issued by the Norwegian Corporate Government Board Philippines Code of Corporate Governance issued by Securities and Commission Required for Listed Companies Singapore Code of Corporate Governance issued by the Monetary Authority of Singapore and Singapore Ltd. and South Africa King Code on Corporate Governance Business association 10
Breaking the glass ceiling: women in the boardroom Provision Regarding Gender Diversity Quotas Existence of Board Term Limits Definition of Independent Directors Supervisory boards must aim to achieve a gender and age diversity and disclose its approach and efforts in this regard. -- None Supervisory board members independence is determined according to several factors, including whether the member or relatives (1) are company managers or management employees, (2) have important business relationships with the company or affiliates, and (3) hold more than 10% of the company s shares. In May 2012, interested parties made submissions to the New Zealand Stock on a proposed amendment to the NZSX/NZDX Listing Rules that would require listed companies to disclose in annual reports the gender composition of their boards, subsidiary boards, and senior management. -- -- Independent Directors are those Directors who are not executive officers or the Issuers and who have no Disqualifying Relationship under the Listing Rules. Code recommends that due attention should be paid to the balance between male and female members of the board. -- -- -- -- -- An independent director is a person other than an officer or employee of the corporation, its parent or subsidiaries, or any other individual having any relationship with the corporation, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Boards and their committees should comprise directors who as a group provide an appropriate balance and diversity of skills, experience, gender, and knowledge of the company. -- The independence of any director who has served on the Board beyond nine years from the date of his or her first appointment should be subject to particularly rigorous review. An independent director is one who has no relationship with the company, its related corporations, its 10% shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director s independent business judgment with a view to the best interests of the company. Code does not explicitly advocate for increased gender diversity but recommends that a board consider whether its size, diversity and demographics make it effective and lists gender as one of several factors of diversity. -- Code states that companies should implement a staggered rotation of nonexecutive directors and that at least one-third of non-executive directors should retire by rotation annually. Independence is defined as the absence of undue influence and bias which can be affected by the intensity of the relationship between the director and the company. 11
Country Governance Code Implementing Body Nature of Requirement Spain Good Governance Code issued by the Comisión Nacional de Mercado de Valores (Spanish National Stock Commission) Tunisia -- -- -- United Kingdom UK Corporate Governance Code issued by the Financial Reporting Council United States Corporate Governance Requirements (Rule 5600) issued by NASDAQ. Corporate Governance Standards adopted in the New York Stock s Listed Company Manual. Required for Listed Companies 12
Breaking the glass ceiling: women in the boardroom Provision Regarding Gender Diversity Quotas Existence of Board Term Limits Definition of Independent Directors Boards should reflect a diversity of knowledge, experience, and gender in order to pursue the social interests of a company. The Code recommends that female candidates should be nominated to cover vacancies of independent directors. -- Independent directors should not stay on boards for a continuous period of more than 12 years. -- The search for board candidates should be conducted and appointments made on merit, against objective criteria, and with due regard for the benefits of diversity on the board, including gender. -- -- The board should determine whether the director is independent in character and judgment and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the director s judgment. The Code includes several factors that may be relevant to this determination, including whether the director has been an employee of the company within the last five years, represents a significant shareholder, and who has served on the board for more than nine years from the date of his or her first election. -- -- -- NASDAQ Rule 5605 defines independence in terms of an individual s relationship with a listed company, which would impair their independence. Section 303A.02 of the NYSE s Listed Company Manual sets forth several independence tests to determine whether an individual qualifies as an independent director. The tests require the board of directors to affirmatively determine that an individual has no material relationship with the listed company. 13