Women on Boards: quotas to increase gender balance in corporations
After almost a decade of debate on the EU platform, a provisional political agreement has been reached on a proposal for a directive to promote a more balanced gender representation on corporate boards.
The proposed directive on improving the gender balance on corporate boards, also referred to as the “Women on Boards Directive”, aims to introduce transparent procedures for the election of members of corporations’ bodies, thereby increasing the share of the under-represented sex on the boards of companies established in EU member states and publicly traded there (EU-listed companies). The directive should not apply to small and medium-sized enterprises with fewer than 250 employees. By 30 June 2026, the companies concerned should achieve a status where at least 40% of non-executive board positions, i.e., non-executive positions on administrative or supervisory boards, and 33% of all board positions are filled by women.
When introducing new procedures for the appointment of board members, companies should ensure that there shall be no automatic preference to one sex to the detriment of qualifications, and that qualifications shall remain the key criterion. However, where two equally qualified candidates seek a position, priority shall be given to the candidate of the under-represented sex. Selection procedures shall be as transparent as possible. Unsuccessful candidates should have the possibility to request information on the course of the selection procedure, i.e., the qualification criteria based on which the selection was made, the objective comparative assessment of those criteria and, where relevant, the considerations tilting the balance in favour of the candidate of the other sex.
Under the proposal, companies will also be required to annually inform the relevant authorities about the representation of women and men on their boards. If they fail to meet the objectives of the proposed directive, they will have to outline how they plan to meet them in the future. They should also publish the information on their website.
Specific sanctions for failures to meet these objectives should be left to the legislators of the individual EU member states; they may include fines or annulments of the appointment of members of the relevant bodies of the corporation.
The draft directive has yet to be approved by the European Parliament and members of the Council of the EU. After that, the directive will enter into force and member states will have two years to implement it.