The end of November saw the adoption of a directive by the European Parliament that seeks to promote gender equality by introducing gender representation quotas for the Boards of listed companies, known as the ‘Women on Boards’ Directive.
The directive aims to substantially increase the number of women on corporate boards throughout the EU by 2026, by setting a minimum objective of a 40% presence of the underrepresented sex among the non-executive directors of companies listed on stock exchanges.
On transposition, Member States may also extend the quota requirement to cover both executive and non-executive directors, in which case at least 33% of all directors should be composed of the underrepresented sex. The choice between the 40% or 33% quotas lies with each Member State and not with the listed companies.
That being said, it is also being proposed that small and medium-sized enterprises be excluded from the scope of the directive. Should this exclusion survive in the final text of the directive, listed companies that employ fewer than 250 persons and either have an annual turnover not exceeding €50m or an annual balance sheet total not exceeding €43m should be excluded from the scope of the directive.
Given that the gender composition of the workforce has a direct impact on the availability of candidates of the under-represented sex, the proposed directive affords Member States the discretion to disapply the quota requirement concerning certain entities where members of the underrepresented sex make up less than 10% of employees of that entity.
Listed companies will be obliged to provide information regarding their respective boards’ gender representation and measures being undertaken to achieve the applicable quotas. A list of those companies satisfying the directive’s requirements annually will be published by each Member State.
Way Forward
The Women on Boards Directive will enter into force 20 days following its publication in the Official Journal of the European Union. Member States will then have two years to transpose it into national law. This should keep pushing discussions on the right board composition up the agenda of all locally listed entities. There is no better time to plan concretely on achieving the right mix of competences, behavioral traits and backgrounds on boards, also in light of these upcoming requirements.
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