Vince Cable has asked the Equalities and Human Rights Commission (EHRC) to advise him on the legality of all-female shortlists for top City jobs as part of the coalition's latest push to get more women on to the boards of major companies.
The business secretary acted after being presented with a report into the headhunting industry commissioned from Charlotte Sweeney, a former head of diversity at banks including HSBC and Nomura, which is published on Tuesday.
Cable said: "The headhunting community is a crucial catalyst to introduce more capable women in the boardroom.
"However, they can often be one of the first hurdles that talented, board-ready women face when trying to reach the top."
The request from the Department for Business, Innovation and Skills for advice from the EHRC on whether a policy of positive discrimination could be legal is a big surprise.
The British government has long argued that its voluntary code has stimulated a significant shift towards more women in Britain's boardrooms, and has vigorously opposed mandatory quotas compelling public companies to hire more female directors – a policy championed by Viviane Reding, European commissioner for justice and rights.
Audrey Williams, a partner at global law firm Eversheds, said that excluding men from candidate lists was littered with legal problems.
"The difficulty with all-women shortlists is that it requires a selection to be made on the basis of gender, which, on the face of it, directly contravenes fundamental principles of EU law prohibiting sex discrimination.
"Whilst there is an exception in EU law which allows derogation from the principle of non-discrimination … this still requires assessment on merit and other conditions to be met.
"Any provision or guidance in support of all-women shortlists would have to be heavily qualified."
In the UK, Lord Davies's 2011 Women on Boards report called for 25% of FTSE 100 directors to be female by 2015. At the time, just 12.5% of FTSE 100 directors were women – although that was more than the 7.8% in the second-tier FTSE 250. There were also 21 FTSE 100 companies with all-male boards.
When the numbers were last analysed in January, they had risen to 20.4% for the FTSE 100 and 15.1% in the FTSE 250. Only two FTSE 100 companies – miners Antofagasta and GlencoreXstrata – currently have all-male boards.
However, critics say the real rise in female boardroom representation has come from the hiring of non-executive directors, who fill part-time roles.
Women make up just 7.2% and 5% of executive directors in the FTSE 100 and FTSE 250.
Currently, there are just four women running FTSE 100 companies: Carolyn McCall at easyJet; Angela Ahrendts at Burberry; Alison Cooper at Imperial Tobacco; and Moya Greene at Royal Mail.
A fifth, Liv Garfield, is joining Severn Trent this spring, although Ahrendts is quitting Burberry in mid-2014 to join Apple, and is to be replaced by Christopher Bailey.
Sweeney's report also recommended that:
• Headhunters should commit themselves to putting forward at "least one strongly recommended woman on the shortlist for all board positions".
• A database of "board-ready" women should be created, to be shared with City firms and investor groups.
• The industry should share its statistics on the percentages of male and female candidates "during the various recruitment stages with government".
Sweeney said: "Throughout my review there was a clear, articulated commitment from the majority of search firms to support the creation of more diverse and balanced boards.
"However, examples where the commitment was transferring into consistent and sustainable action were mixed.
"Further transparency across the industry will help identify where any further barriers are and inform where focused action is required."
Davies will publish his latest annual update to his Women on Boards report this month.
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