Is a quota the best way to get more women on the Board?

Companies may face quotas unless they promote more women to board level says David Cameron, arguing that businesses are “failing” the economy by not having enough women in senior positions.

Appointing women as directors and encouraging them as entrepreneurs is “about quality, not just equality,” Cameron said at a meeting of the Northern Future Forum in Stockholm yesterday.

“The case is overwhelming that companies are run better if we have men and women alongside each other,” Cameron said in a round-table discussion. “If we can’t get there in other ways I think we have to have quotas.”

12 months ago Mervyn Davies recommended increasing the number of women on boards though there has been little progress since. Women now make up 15% of directors of companies in the FTSE 100, up from 12.5% this time last year, and there are now only 10 all-male boards in the FTSE, down from 21 last year.

Starting in October 2012, as a result of a new provision in the corporate-governance code, companies will have to report on their policy for boardroom diversity and how they are making progress in delivering it.

“Women now make up nearly half the workforce across Europe and the majority of university degrees, but they are still not sufficiently represented at the senior boardroom level,” Cameron said in a statement before the meeting. “The evidence is that there is a positive link between women in leadership and business performance, so if we fail to unlock the potential of women in the labor market, we’re not only failing those individuals, we’re failing our whole economy.”

Although David Cameron mentioned the possibility of quotas he later clarified his position, saying that what is needed is “positive action stopping short of positive discrimination in law through quotas.”

If women entrepreneurs in the U.K. were as successful as those in the U.S., there would be an extra 600,000 women-owned businesses contributing £42 billion to the economy, according to the U.K.’s submission, which was published on the forum’s website.

Cameron also said he wants to explore a Swedish program that gives tax breaks to homeowners who employ people to provide household services, such as cleaning and gardening.

The forum was established by Cameron last year to bring together the prime ministers of Nordic and Baltic countries along with the U.K.

This year’s conference, hosted by Swedish Prime Minister Fredrik Reinfeldt, focused on women in business and older people remaining in the workforce.

“A male atmosphere creates more risk and a greater risk of corruption,” Reinfeldt said in the discussion. “To say the least, more women in the financial sector would be very good in bringing down the risk level.”

Whilst it is obvious that greater Board diversity will lead to better Corporate Governance, quotas and tokenism are definitely not the way to go – what is needed is much more emphasis on improving the diversity of the pipeline that will produce future executive and non-executive directors.

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