EU Board Gender Quotas

Our key takeaway: The European Parliament has adopted an EU Directive that expects gender quotas to be met on Boards by 2026. Boards will need 40% women non-executive board members, and 33% women in total, counting both executive and non-executive directors. In the recruitment process, women are to be preferred – if they are equally qualified as a candidate of the other sex. These quotas come amidst a growing body of research that an inclusive and diverse board room play a significant role in ensuring that the companies the board governs is future-fit. To convey the importance of this directive, we quote co-rapporteur Lara Wolters: “Today is a victory for girls who, as we very well know, cannot be who they cannot see.” If anyone counters with the risk that women are only appointed based on gender, rather than merit: “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.” 

The European Parliament has adopted an EU Directive on gender quotas for corporate boards, the Women on Boards Directive (November 2022):

• At least 40% gender-balance among non-executive board members: The EU Directive establishes an obligation of member states to ensure that by 30 June 2026, large, listed companies have 40% non-executive board members of the under-represented sex, and 33% of both executive and non-executive directors combined. Companies will need to appoint relevant positions “on the basis of comparative, analysis of the qualifications of each candidate, by applying pre-established, clear, neutrally formulated and unambiguous criteria”; and, in the recruitment process, as a main rule give priority to “the candidate of the under-represented sex if that candidate is equally qualified as a candidate of the other sex in terms of suitability, competence, and professional performance.” Companies will also need to make individual commitments towards gender-balance among executive directors.
  

• Companies’ disclosure obligations: Companies will need to report annually to the competent authorities and on their websites on the gender representation among executive and non-executive directors. Unsuccessful candidates will be able to ask the company to disclose the qualification criteria used for the selection, as well as the objective comparative assessment of those criteria and the considerations tilting the balance in favour of the candidate of the other sex.
  

• Sanctions: Member states will lay down appropriate sanctions against non-compliant companies; such as administrative fines and annulment of the appointment or election of non-executive directors contrary to the legislative requirements.