I'm looking for...


Will investors benefit from France’s gender diversity drive?

By: Annalise Toberman


By having higher female representation in executive leadership positions, research proves that companies will deliver better long-term sustainable growth to investors.

Gender diversity has increased at French companies but there is still a lack of women at the very top.

To tackle the issue, the French Parliament voted in May to impose a minimum quota for women in executive leadership positions within company boardrooms.

All companies with 1,000 employees or more will have to set targets of 30% women in executive leadership by 2027 and 40% by 2030.

France has made sweeping progress with board gender balance in recent years, putting it in the lead across Europe. The proportion of women on boards of the biggest 40 French companies (CAC40) rose to 45% by 2019 from just 10% in 2009.

But like other countries, it has been less successful at getting more women into executive leadership positions. Just 22.4% of executive committees in the SBF 120 is women as of March 2021, according to Ethics & Boards. While much has been said about gender diversity by companies, there has been more talk than action.

Diversity quotas work

France follows Germany which in 2020 introduced a new law to force all large, publicly listed companies to have at least one woman on their executive boards, and there are expectations that other countries could follow suit.

Quotas have previously attracted scepticism, but there is more support this time round following the success of its Copé-Zimmermann law, which required companies to have at least 40% of women on boards by 2020.

Meanwhile, research by City University of London’s Business School said businesses are more compliant with gender diversity regulation if it is enforced than if it is voluntary.

Dr Sonia Falconieri, a reader in finance, said that gender quota regulations have however “not yet had an overall positive impact on the appointment of female executives or board chairs, which remains a great challenge and an obstacle to gender equality.”

Numerous studies have proven that diversity of thought, experience and background create greater, positive, long-term outcomes. Firms with a higher representation of women on boards saw competitive advantages in terms of higher net margins and lower share price volatility, according to Women on boards and company performance, a report published by CFA Society Poland in partnership with the 30% Club.

Asset managers take action

Six asset managers including Amundi, AXA Investment Managers and La Banque Postale Asset Management, decided to act last year by launching the 30% Club France Investor Group, urging French large caps to have at least 30% of women on executive management teams by 2025. The group is replica of the UK’s 30% Club Investor Group which has made a lot of progress since its launch in 2010.

In its statement of intent, the 30% Club France Investor Group said: “both boards and executive management teams that genuinely embrace cognitive diversity, as manifested through appropriate gender representation and a broad spectrum of skills and experience, are more likely to achieve better outcomes for investors.”

An increasing number of asset managers have been pressurising companies to improve gender diversity, but this has been more through engagement rather than divestment or stock screening.

Diversity and inclusion were high on the agenda at May’s AGM season, when BNP Paribas Asset Management AM rejected 37% of resolutions relating to director elections, half of which were specifically for diversity reasons.

Since 2019, BNPP AM’s voting policy has included an explicit provision to promote increased female board representation, and since 2020, it has required a minimum of 30% of board members to be women in Europe, North America, Australia, and New Zealand. Its policy is to vote against all male directors if the level is below 20% and from 2025, BNPP AM plans to apply a threshold of 40% globally. The firm believes that having women on boards helps ensure that companies deliver long-term sustainable value.

The challenges for companies

While the French gender quota for executive leadership proposal still needs to go the Senate and be passed before the end of Emmanuel Macron’s presidential term, there is clearly already a lot of institutional investor pressure mounting on companies to change. This does not come without its challenges, in particular ensuring there is a sufficiently diverse talent pool across the entire company.

The 30% Club France Investor Group said it is expecting companies to develop an internal female talent pipeline and build on it when considering the appointment of a new woman at the executive management team.

It will require disclosures expectations from investee companies and engage with them on processes to identify suitable candidates, and will raise questions where there has been failure in the nomination process in terms of executive management diversity. It warned it could vote against the re-election of the board chair or nomination committee chair if there is a lack of diversity at executive management levels, and engagement has not resulted in a satisfactory outcome.

While most asset managers are using the engagement approach as a first port of call, later down the line they could start to divest from some companies that fail to improve their gender diversity which is an increasingly important topic for investors. However, divesting from pale, male and stale boards is unlikely to be widely adopted by fund managers for some time.

In that case, investors would certainly benefit over the longer term from France’s drive to impose a minimum quota for women in executive leadership positions. By having better representation right at the top, companies will deliver better long-term sustainable growth to investors.

Annalise Toberman

Annalise has spent her working life intensively researching B2B and B2C audiences in the financial sector. A keen qualitative researcher, she has conducted thousands of interviews across advisers, DFMs, fund houses, platforms, pension providers and consumers.

Related Reading