Parental leave for directors – an issue of equity

Logo snipped from Governance NZ websiteA speech by Sue Kedgley ONZM, convenor of the NCWNZ Influence & Decision-making Action Hub and former member of New Zealand Parliament, delivered to the Women on Boards Summit on 17 August 2023. (See the whole program here.)

I can still vividly recall the jubilation I felt when Laila Harre’s Paid Parental Leave bill, which gave all women employees a statutory right to 12 weeks of paid parental leave, was passed in Parliament in 2002. It had taken years of lobbying and working with women’s groups to get the
legislation passed, and it felt like a huge milestone for New Zealand women. I was equally delighted when paid parental leave was extended to 18 weeks in 2016, and 26 weeks in July 2020. At the time, I assumed the legislation applied to all women in employment in New Zealand, and so it never occurred to me, or I suspect to most other MPs, that the right to parental leave did not extend to women who were company directors or to locally elected Councillors.

So, I was surprised when a member of the National Council of Women, Margaret Cook, pointed out at a meeting last year that women directors and locally elected Councillors are not entitled to parental leave in New Zealand. This was an equity issue that needed to be addressed, she suggested, if we wanted to see more women on boards and Councils. We agreed, and so we set up a small group to campaign to extend the statutory right to paid parental leave to women directors and Councillors.

As a first step, we contacted the Institute of Directors, Women on Boards and Local Government New Zealand, who all confirmed that there is indeed no provision under our law for a director of a company, a non-profit organisation or a trust, to take parental leave. The official reason for this, it was explained, was firstly, that company directors are not considered to be employees under our law, and so they don’t have the same rights or protections as other employees, such as personal grievance protection or paid parental leave. And secondly, the concept of a director taking a leave of absence from a board, does not exist in New Zealand company law.

So, while there’s nothing to stop a director from asking for a leave of absence from a board to look after a newborn child, our company law does not address the issue of how a director could be absolved from any liability risks if something went wrong while they were on leave. As the law is silent on this issue, a director on parental leave would continue to have extensive legal duties to the board and would be responsible for any decisions that were taken in their absence -- even if they had applied for, and
received, a legitimate leave of absence. They would also be subject to any liability risks associated with the board while they were on leave.

There is no option, either, under existing company law, for directors to delegate their duties to other board members during a period of a leave of absence. So, in practice, the only completely safe option for a director wanting to take a leave of absence and not incur any liability risk, is to resign from a Board. A further problem for a director who opts to resign from a board to take parental leave, is that there’s no obligation on a board to hold their position open, or to guarantee them a seat at the table, when they are ready to return. And I should add that while I am talking about women directors, this would apply equally to a male board member who wanted to take parental leave.

The justification for this unsatisfactory situation is that Boards are required, under the 1993 Companies Act, to act in the best interests of a company at all times, and it is argued that there could be circumstances, such as if a board was in the middle of a take-over, when allowing a board member to take a leave of absence could expose a board to risk. Allowing a skilled Director to take a leave of absence could result in a skills gap on a board, or in quorum issues that could adversely affect the performance of a board.

The solution to the dilemma that directors face if they want to take parental leave, would be to amend our company law, as Germany is proposing to do, and allow directors to take a leave of absence. And suspend their rights and obligations to the board, and any liability for damages, while they were on leave, and, as with any other employment role, allow them to automatically resume their role on the board at the end of their parental leave. Another possible solution would be to deem company directors to be self-employed and extend them the same parental leave rights as all other self-employed New Zealanders enjoy. In Denmark and the United Kingdom
directors are deemed to be self-employed and are therefore eligible for paid parental leave and their positions are held open while they are on leave.

In the meantime, however, and until such time as our law is changed, it is left up to individual board members to negotiate a solution to the ‘problem’ of them wanting to take parental leave. The onus is on the director to make their case to a board, and this places a considerable burden on individual board members, and comes with significant potential personal risks, as the Institute of Director’s points out in a 2020 paper entitled Should I Leave, or Should I Go? Directors, leave of absence, and liability, which provides guidance to directors wanting to take leave from a board.

This is extremely unfair, in our view, and constitutes a significant barrier to young women wanting to pursue governance careers. It is difficult enough for young women directors who may not seem to quite fit the mould, without saddling them with responsibility for having to negotiate permission to take leave from a board. Nor should women directors be professionally disadvantaged, or forced to resign from a governance role, if they want to take a few months parental leave. 

So how are women directors managing in this unsatisfactory situation?

Lani Evans was Chair of Vodafone Thank you Payroll when she became pregnant in 2018. She had assumed she would be entitled to parental leave when her baby was born. When she discovered this wasn’t the case, she sought advice from the Institute of Directors and reached an agreement with her board that she would resign and take six months of unofficial parental leave, on the understanding that she would be reappointed to the Board once her leave was over, and her position would not be up for a vote. After resigning and taking six months of unpaid leave, she returned to the board and resumed her governance career and went on to become head of the Vodafone Foundation. She helped draft an official leave of absence policy for directors on her board and is presently on leave with her second child.

Lani was grateful that her Board agreed to reappoint her, as there’s no obligation on a board to do this. But she admits that having to give up her hard-won governance roles to start her family “felt unjust and demotivating.” It can be really challenging for younger women who may not have good connections or be perceived to fit the mould, to get appointed to a board, she points out.

So, it’s unfair, if women who want to take a few months of parental leave, are forced to give up their governance roles or start their governance careers all over again. If we want more diversity on boards, we should be actively removing barriers to the participation of women.

Women who are directors of charities, trusts or non-profit organisations face the same dilemma, as Louise Evans, a newly elected member of the Invercargill Licensing Trust, found out when she became pregnant last year. To avoid being liable for decisions that were made while she was on leave, she opted to resign from her position on the Trust and to become a non-paid volunteer for the Trust. Louise was grateful the Trust kept her position open while she was on leave. But she worries that women directors who can’t afford to do this might be forced to step back completely from governance while their children are young, and this would mean a loss of diversity on boards. “I find it pretty weird that if we’re trying to promote diversity on boards, and younger female voices, that this barrier exists,” she says. If, as a nation, we
considered it truly important to have women on boards, there wouldn’t be barriers like this holding women back.”

Miriam Walker tried to combine new parenthood and governance when her son was born in 2015. She was shocked to discover she wasn’t entitled to parental leave and after initially struggling through board meetings while she was breast-feeding, she decided to resign from her board and take a year’s break from governance — primarily because she was concerned about liability issues. A year later, she resumed her governance career and was elected to the Netsafe board. She believes the absence of parental leave for directors is likely to discourage talented young women in their thirties and forties who anticipate becoming pregnant, from pursuing a governance career.
That’s a real problem, she says, because women in this age-group are significantly under-represented in governance. It would be far better, she argues, if directors were encouraged to start their governance careers in their thirties.

Toni Moyes was a Future Director of Fisher and Paykel Healthcare, when she became pregnant in 2021. She took parental leave from her full-time job, but she decided to remain as a director of Fisher and Paykel Healthcare, a role she loved, while looking after her new-born child. It took a lot of extra effort and a great deal of juggling and support from her family to switch from mothering an infant into corporate governance mode, she says, especially in the first three months as she grappled with the physical demands of early motherhood, recovering from childbirth, breast-feeding and sleep deprivation. When she needed to attend an Auckland board meeting, for example, her partner flew up with her and sat in a next door room with her baby, so she could breast-feed him. Despite the challenges, she says, the opportunity to engage her brain as a director while she was a new mother, was a godsend. “Having high-quality, part-time work was the perfect balm for the mini-identity crisis I experienced as a new mum. I loved the opportunity and it helped me feel like a whole person.” Toni continued on with her governance career and is now chair of the Fisher and Paykel Healthcare Foundation. But she doesn’t believe it should be left up to individual women to negotiate a solution if they have a new-born child, as if they were a burden to the board.

Nor should a woman’s ability to combine governance roles with mothering be dependent on how supportive, or unsupportive, a board is, she argues. It would be much easier and fairer for everyone if the law was changed. Until that happens, Toni believes all boards should be flexible and supportive of directors who are in their first few months of parenthood. Many companies go beyond their statutory obligations and offer full salaries to employees on parental leave, she points out, and she believes the same opportunities should be extended to women in governance roles on boards.

The argument is sometimes made that women directors are in a relatively privileged position and should therefore be able to juggle their parental responsibilities with being a company director. But as Lani Evans points out, the responsibilities and liabilities of directorships are becoming increasingly onerous, and not all women have enough support to be able to juggle both roles, especially if they have several children or are single mothers. And many women cannot afford to resign and take parental leave without an income, especially if there’s uncertainty as to whether their position will be offered back to them when they return.

For all these reasons, the National Council of Women believes that extending paid parental leave to directors is an important equity issue that urgently needs to be addressed. In our view, directors should have the same entitlement to parental leave as anyone else working in a leadership role. They should be able to take a few months of parental leave without being professionally disadvantaged or having to resign from their governance roles and lose their income while on leave. The National Council of Women would welcome the opportunity to work with Women on Boards to change the law to extend parental leave to directors.

We believe it will be hard to achieve gender diversity goals on boards, which we note is one of the goals of Women on Boards, until this issue is addressed, as it is clear to us that the lack of provision for parental leave, combined with the risk of personal liability while on leave; the lack of options to return and the loss of income if a director is forced to resign from a board, all constitute a significant barrier for young women who want to pursue governance careers. This is a real concern, in our view, as women are still massively under-represented on private sector boards and constitute only 25.9% of directors on private companies.

On a final note, we agree with leadership consultant, Dr Ellen Joan Nelson, who is concerned that most of the focus on getting women into leadership or governance positions, has been on helping individual women, by providing them with courses, coaching and programmes to increase their confidence. While these are valuable, they are band-aid solutions, and what is really needed, she argues, is to fix the structures that are creating barriers to women in leadership positions.

Extending parental leave to directors would help overcome a significant barrier to women’s representation on boards. The recent and very welcome proposals by Labour and National, to extend Parental Leave entitlements, together with the Prime Minister’s statement that a comprehensive review of Parental leave legislation is needed, suggest that the time is right to push for a change in the law. But to achieve that change will require concerted work from Women on Boards, the Institute of Directors and other organisations that represent directors.


To read more articles from The Circular (July-August 2023) issue 642, click on the tag below.
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