All large listed companies in the European Union (EU) will have to take steps to increase the presence of women on boards by July 2026, so that at least 40% of non-executive director positions or 33% of all administrator positions are occupied by women until the end of June 2026. The directive, approved this Tuesday in the European Parliament, aims to introduce transparent recruitment procedures in companies and leaves out small and medium-sized companies with less than 250 employees .
The European Commission first presented its proposal in 2012, with the process blocked in the Council for almost a decade, until the Employment and Social Affairs ministers reached a common position in March 2022. Council reached an agreement in June.
“In the ten years that this directive has been on the shelf, meeting rooms have continued to be predominantly the domain of men,” said Lara Walters, co-rapporteur, quoted by the European Parliament, adding: “But in countries where binding quotas have been introduced , considerably more women were appointed. With this law, these countries will no longer be the exception and gender balance in boardrooms of listed companies will become the norm across the EU”.
Also the Austrian co-rapporteur Evelyn Regner believes that the adoption of the directive is an important step forward for gender equality. “We are finally giving women a fair chance to hold top corporate positions and improving corporate governance. Women are innovative, smart, strong and capable of many things. We are removing one of the main obstacles for women to achieve ‘ top jobs’: men’s informal networks,” he said.
Parliament underlines that merit must continue to be the fundamental criterion in selection processes, which must be transparent, according to the new rules. But in cases where candidates are equally qualified for a position, priority should be given to women.
Target companies will have to annually provide information on gender representation on their boards of directors to the competent authorities and, if the objectives have not been achieved, how they intend to achieve them. This information should be published on the company’s website in an easily accessible form.
Sanctions applied state by state
The definition of sanctions for non-compliance may include the annulment of decisions of the Board of Directors in question or fines, but it will be up to each Member State (MS) to fix them, having 2 years to do so from the entry into force of the directive. Entry into force takes place 20 days after its publication in the Official Journal of the EU.
It should be noted that, in 2021, only 30.6% of the members of the boards of directors of the largest listed companies in the EU were women, with significant differences between the Member States, with variations between the 45.3% in France and 8.5% in Cyprus. In Portugal, the figures were 31%, with an increase of only 0.4% this year. The European average has increased by only 1% since last year (from 31.3% in 2021 to 32.3% in 2022).
Indeed, by 2022, less than 1 in 10 of the largest listed companies in Member States have a female chairman or chief executive, despite increased representation on boards of directors. Data are presented by the European Institute for Gender Equality (EIGE) in its gender statistics database.
Since the mid-2000s, member states have adopted three main policy approaches to increasing women’s representation on boards of directors: gender quota laws for boards of directors; recommendations for the representation of women on boards of directors in corporate governance codes, and laws mandating disclosure about the representation of women on boards of directors.
To date, nine EU Member States have adopted the first approach: Spain in 2007, followed by Italy, Belgium, France and the Netherlands in 2011. Germany also adopted a quota in 2015, followed by Portugal and Austria in 2017. More recently, in 2020, Greece joined these countries, according to the study “Women in the politics of boards of directors in the Member States and the effects on corporate governance”, by the European Parliament.
The directive will enter into force 20 days after its publication in the Official Journal of the EU, with Member States having a period of 2 years to apply the new rules.