News Analysis

European Union agrees to impose a 40% quota for women on boards 

by Dan Byrne on Jun 9, 2022

A deal has been reached in the European Union that will introduce a 40% quota for women on boards across the bloc – almost ten years after proposals were first tabled.

What’s happened?

The directive, agreed to by the European Commission, Parliament and Council, aims to have 40% of the seats on non-executive boards taken by women, or 33% among all directors.

Painfully slow progress

European Commission Vice-President for Values and Transparency, Věra Jourová, has welcomed the news, saying that it would address what she called “painfully slow progress” in achieving gender balance within European corporate governance.

“With this Directive, we will collectively accelerate our efforts to strive for gender equality and better balance in economic decision-making,” she said in a statement Tuesday.

Her comments were echoed by Commission President Ursula von der Leyen, who said this week, “Diversity is not only a matter of fairness. It also drives growth and innovation.”

“The business case for having more women in leadership is clear. After ten years since the European Commission proposed this directive, it is high time we break the glass ceiling. There are plenty of women qualified for top jobs: they should be able to get them,” she said.

Meaningful progress

First proposed in 2012, this directive stalled without any meaningful progress for years due to stalemates at the legislative level. During that time, gender balance at the corporate governance level also slowed.

Despite progress in bigger EU states like France, Germany, and Italy in the early 2010s, more recent figures show that women take up less than a third of all non-executive board positions within the bloc’s largest companies.

The directive is the bloc’s latest attempt to address this and tip the scales in favour of the underrepresented. Not being full-on regulation, it will be up to the individual member states to achieve the quotas through unique legislation – incorporating penalties for non-compliance.

Member states must sincerely penalise non-compliance

The directive also seeks to ensure that companies who don’t reach this target apply “transparent and gender-neutral criteria” to prove that they are doing everything practically possible to address the imbalance. Measures to achieve this include:

· Giving preference to candidates of the underrepresented sex in companies where the imbalance persists and where the final candidates for a position are equally qualified.
· If an unsuccessful candidate requests it, companies must reveal the criteria they used in their final decision. If a member of the underrepresented sex is not selected, the onus is on the company to prove they were not equally qualified.
· Companies that fail to reach the quotas must report on why they fell short and what they are doing to address it.
· Member states must sincerely penalise non-compliance – legislating for measures that are “effective, proportionate and dissuasive.”

The directive now awaits final approval by Parliament and the Council of the European Union. Once published, member states will have two years to craft the necessary legislation to support its implementation.

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