08.06.2022 Human Ressources International Talents

Women on boards: deal to boost gender balance in companies

women on boards

After being blocked in the Council for a decade, EP and EU countries’ negotiators finally agreed on a bill to increase the presence of women on corporate boards.

The provisional agreement reached on Tuesday night on the draft legislation aims to ensure gender parity on boards of publicly listed companies in the EU.

At least 40% of non-executive directors should be women

The so-called “Women on Boards” Directive 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. Thanks to Parliament, companies must comply with this target by 30 June 2026, compared to the Council’s proposal of 31 December 2027. In cases where candidates are equally qualified for a post, priority should go to the candidate of the under-represented sex.

MEPs insisted that merit must remain the key criterion in selection procedures, which should be transparent, as part of the agreement. Listed companies will be required to provide information to the competent authorities once a year about the gender representation on their boards and, if the objectives have not been met, how they plan to attain them. This information would 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.

Penalties

The proposal includes effective, dissuasive and proportionate penalties for companies that fail to comply with open and transparent appointment procedures. Parliament succeeded in including examples of specific penalty measures, such as fines and companies having their selection of board directors annulled by a judicial body if they breach the national provisions adopted pursuant to the Directive.

Next steps

Once Parliament and Council have formally approved the agreement, the Directive will enter into force 20 days after it has been published in the EU’s Official Journal. Member states would need to implement the directive two years after it has been adopted. Parliament succeeded in including an assessment on the scope of the directive at a later stage on whether non-listed companies should be included in the scope of directive.

Source: Press release from the European Parliament