EU countries agree on a rule to improve gender equality in company leadership

The Ministers of Employment and Social Affairs of the European Union (EU) gave their approval to a community directive that aims to improve the gender balance in the boards of directors of companies, ten years after the European Commission (EC) presented the legislative proposal.

After the green light from the Member States, it will still be necessary to negotiate the text and reach an agreement with the European Parliament, the EU’s co-legislator together with the countries, so that the norm can enter into force.

The directive establishes a quantitative target for the percentage of members of the “underrepresented sex” on the boards of directors of listed companies, the EC, which represents countries, said in a statement. Women are usually the underrepresented sex.

Companies will need to take steps to reach, by 2027, the minimum target of 40% members of the underrepresented sex for non-executive directors or 33% for all members of their board of directors.

If these objectives are not met, the companies would have to carry out appointments or elections of directors applying “clear, unequivocal and neutrally formulated” criteria.

Countries must also ensure that, when choosing between candidates with the same qualifications “in terms of suitability, skills and professional performance”, companies give priority to the applicant of the underrepresented sex, women in most cases.

The EC specified that Member States that have previously taken measures on their own, such as national targets to achieve a more balanced representation of women and men, can suspend the appointment or election requirements provided for in the directive.

“The same thing happens if they have already made progress that allows them to approach the objectives set in the directive,” said the EC.

In its position, the community institution also clarified that it is up to the Member State, instead of the companies, to choose between the two proposed objectives. Therefore, countries will be able to choose whether they prefer to reach 40% for non-executive directors or 33% for all members of the board of directors.

The EC admitted that progress has been made towards greater gender equality on boards, but noted that disparities remain.

In that sense, he detailed that in October 2021 only 30.6% of the members of the boards of directors and just 8.5% of the presidents of the boards of directors were women.

“The difference between the Member States is considerable. Those where measures have been introduced are progressing much faster than those where no measures are in place,” he noted.

The EC stressed that the existence of a higher proportion of women “in economic decision-making positions” is expected to have “a positive indirect effect for the entire economy” and highlighted that women represent “around 60% of new university graduates” in the EU.

“In this way, a better gender balance on company boards would also make it possible to get more out of Europe’s large pool of highly-skilled women,” she said.

Sweden voted against because it considered that the measures on gender equality should not be adopted by the EU, but by the countries.

Poland also opposed it because it believes that the directive breaks the principles of subsidiarity and proportionality, and believes that gender equality can be achieved without binding quotas. Estonia, Slovakia and Hungary opted for abstention.