News Analysis

40 per cent of non-executive directors should be women

by Stephen Conmy on Jan 25, 2022

The EU has set a target for 40 per cent of non-executive directors in listed companies to be women.

The European Commission president, Ursula von der Leyen, says she is “increasingly optimistic” that Europe will unblock long-delayed legislation this year to boost women’s representation in corporate boardrooms.

In an interview with the Financial Times, Ursula von der Leyen indicated she would work with France to push for the proposed directive during the six months when Paris holds the rotating EU presidency.

Von der Leyen said lawmakers should try to resolve the directive in the first half of the year, and a deal could “definitely” emerge sometime in 2022.

“It’s time to move forward with this file,” she said. “It’s been sitting on the shelf for ten years now, but in these ten years, there has been a lot of movement and learning.”

In 2012, the commission first proposed the directive for gender balance in boardrooms.

The directive was opposed by several European countries, including Germany and some Nordic and Baltic states. They said such matters should be handled nationally rather than EU-wide.

Under the proposed directive, listed companies would have a goal of having 40% of non-executive directors be women. However, this could be lowered for companies with a single-tier management system.

Companies that do not meet their targets must explain why they did not meet them and report how they plan to remedy it.

Sanctions are not specified in the directive since member states will determine these, and the rule does not apply to small and medium-sized companies or unlisted firms.

“The measures will only affect companies listed on stock exchanges in the EU’s Member States. It will not apply to small and medium-sized enterprises (companies with less than 250 employees and an annual worldwide turnover not exceeding 50 million EUR) and non-listed companies. This means an estimated 5 000 companies in the whole of the EU will be affected,” states the proposal.

Diverse boards are more successful

According to the European Institute for Gender Equality, France currently has the highest proportion of women on the boards of listed companies at 45 per cent, compared to the EU average of 30 per cent.

Von der Leyen said that there is overwhelming evidence that companies with diverse boards are more successful and that introducing legal requirements accelerates progress towards more gender-balanced boards.

“If we look at the EU overall . . . and at the challenges ahead of us, we need all the width of talents we have, and of course, for that, we need to open up for women in leadership positions,” she said.

non-executive directors
women on boards

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