The adoption of the so-called “Women on Boards” Directive on Tuesday comes ten years after the proposal was first made. It aims to introduce transparent recruitment procedures in companies, so that at least 40% of non-executive director posts or 33% of all director posts are occupied by the under-represented sex by the end of June 2026.
Merit must remain the key criterion in selection procedures, which should be transparent, according to the new rules. Listed companies will have to provide information about the gender representation on their boards to the competent authorities once a year and, if the objectives have not been met, how they plan to attain them. This information will be published on the company’s website in an easily accessible manner.
Small and medium-sized enterprises with fewer than 250 employees are excluded from the scope of the directive.
Member states need to put in place rules on effective, dissuasive and proportionate penalties, such as fines, for companies that fail to comply with open and transparent appointment procedures. A judicial body could also annul the board of directors selected by the company if it breaches the principles of the Directive.
However, many in and outside of the Parliament disagree with this regulatory approach. Several countries, including Sweden, Slovakia, Hungary, and Estonia, argue that the issue of gender balance on company boards is a matter for national governments to address rather than the EU.
In response to this, Commissioner Dalli said that based on recent data, “progress made by voluntary initiatives was much slower and less sustainable.”
“When self-regulation does not bring the desired effect, EU regulatory action is necessary,” she added.
Another criticism is that the use of quotas could lead companies to appoint women to board seats based on gender rather than merit, to which Wolters countered: “I think it’s time we leave that argument where it belongs, in the previous century.”
“We’ve tried asking nicely. We’ve tried waiting for the old boys’ networks to die out, and to no avail. Quotas are a blunt instrument, yes, but where there’s a lack of will, you need a law,” she added.
Once published in the Official Journal, the Directive will enter into force 20 days after publication and Member States will have two years to transpose its provisions into national law. They will have to ensure that companies strive to meet the 40% target for non-executive boards, or 33% for all board members, by 30 June 2026.
The Commission tabled the proposal on gender balance in company boards in November 2012. While the European Parliament adopted its position in 2013, the Council could not reach an agreement with some Member States considering that binding measures at the EU level were not the best way forward.
Image © European Commission