Brussels, 7 June 2022
The European Commission welcomes the political agreement reached today between the European Parliament and the Council on the Directive on improving the gender balance among non-executive directors of listed companies proposed by the Commission in 2012.
Europe has many highly qualified women with 60% of current university graduates being female. Nevertheless, women are underrepresented in high-level positions, including in corporate boards and the progress is very slow. Only a third of members of non-executive corporate boards are women and this is even less among executive boards. The Directive sets a target for EU companies listed on the EU stock exchanges to accelerate the reach of better gender balance. It sets a share of 40% of the underrepresented sex among non-executive directors and 33% among all directors. These companies must ensure that board appointments procedures are clear and transparent, and that applicants are assessed objectively based on their individual merits, irrespective of gender.
Driving up gender equality with clear targets and objective appointments based on merit
The agreed Directive will ensure that gender balance in corporate boards of listed companies is sought across the EU, while allowing for flexibility for Member States that have adopted equally effective measures. This flexibility will allow for the suspension of the procedural requirements set out in the Directive.
The main elements of the Directive are:
- At least 40% of the underrepresented gender must be represented in non-executive boards of listed companies or 33% among all directors. Member States have to ensure that companies strive to achieve this objective. Those companies that do not achieve those objectives must apply transparent and gender neutral criteria in the appointment of directors and prioritise the underrepresented sex where two candidates of different sexes are equally qualified.
- Clear and transparent board appointment procedures with objective assessment based on merit, irrespective of gender. The selection procedure of non-executive directors will need to comply to the following binding measures:
- Where two candidates of different sexes are equally qualified, preference shall be given to the candidate of the underrepresented sex, in companies where the target for gender balance is not achieved.
- Companies must disclose their qualification criteria should the unsuccessful candidate request it. Companies are further responsible to prove no measures were transgressed, if there is suspicion that an unsuccessful candidate of the underrepresented sex was equally qualified.
- Companies must undertake individual commitments to reach gender balance among their executive directors.
- Companies that fail to meet the objective of this Directive must report the reasons and the measures they are taking to address this shortcoming.
- Member States’ penalties for companies that fail to comply with selection and reporting obligations must be effective, proportionate and dissuasive They could include fines and nullity or annulment of the contested director’s appointment. Member States shall also publish information on companies’ that are reaching targets, which would serve as peer-pressure to complement enforcement (“faming” provision).
Members of the College said:
The President of the European Commission, Ursula von der Leyen, said:
“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.”
The Vice-President for Values and Transparency, Věra Jourová, said:
“The first time the Commission put the issue of women in economic decision-making high on the agenda was in 2010. Since then, women on boards have risen by 17 percentage points, mainly due to legally binding initiatives implemented in some Member States. This remains a painfully slow progress. With this Directive, we will collectively accelerate our efforts to strive for gender equality and better balance in economic decision-making.”
Commissioner for Equality, Helena Dalli, said:
“Today’s agreement on Gender Balance on Corporate Boards takes our Union another step towards stronger and fairer societies. Talent has no gender and women’s leadership skills and vision matter. Yet, entrenched selection patterns of corporate board members continue to largely overlook women candidates. Change in this sector only materialised in countries that set quotas by law or policy. It is time for women and men to be equally represented on company boards EU-wide. Beyond the moral reasons for diversity and inclusion, there are ample benefits of this Directive for companies, including greater creativity and increased productivity.”
Next steps
The political agreement reached by the European Parliament and the Council is now subject to formal approval by the co-legislators. Once published in the Official Journal, the Directive will enter into force 20 days after publication and Member States will then need to transpose the new elements of the Directive into national law within two years.
Background
The Commission tabled the proposal on gender balance in company boards in November 2012. It aimed at improving transparency in the selection of board directors in the largest publicly listed companies. While the European Parliament adopted its position in 2013, the Council could not reach an agreement on the file for almost ten years, with some Member States considering that binding measures at the EU level were not the best way to pursue the objective.
In her political guidelines, President von der Leyen committed to building a majority to unblock the Directive on women on boards.Finally, on 14 March 2022, the Council was able to adopt its general approach, unblocking the file. On 23 March 2022, the European Parliament reconfirmed its position, thereby paving the way for negotiations between the two co-legislators.
To lead by example, the Commission has, for the first time, achieved a fully gender-balanced college of Commissioners: since October 2020, 13 out of 27 Commissioners are women. The Commission also strives to reach gender parity (50%) at all levels of its management by the end of 2024.
National legislation and the state of gender balance in economic decision-making vary across Member States. Eight Member States have adopted national gender quotas. Ten Member States have opted for softer non-binding measures, and nine have no substantial legislation on the issue.
Legislative action to address gender imbalance continues to drive progress. Gender imbalance is more than twice as severe in countries that have taken no substantial action against countries that introduced measures. Countries with national quotas have the highest share of women sitting as board members of listed companies. However, to this day only one Member State has achieved effective gender balance on corporate boards.
A corporate board of a listed company is balanced when each gender makes up at least 40% of its composition.
The EU Gender Equality Strategy 2020-2025 presents policy objectives and actions to make significant progress by 2025 towards a gender-equal Europe. The goal is a Union where women and men, girls and boys, in all their diversity, are free to pursue their chosen path in life, have equal opportunities to thrive, and can participate equally in and lead European society. One of its key objectives is achieving gender balance in decision-making.
More Information
Women in economic decision-making in the EU – Publications Office of the EU (europa.eu)
President von der Leyen speech at the EWOB’s Gender Diversity Award (europa.eu)
Women’s situation in the labour market | European Commission (europa.eu)
EU action to promote gender balance in decision-making | European Commission (europa.eu)
EU Parliament: Women on boards – deal to boost gender balance in companies
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40% of non-executive director posts should go to the under-represented sex
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Dissuasive penalties for non-compliance
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Small and medium-sized enterprises with up to 249 employees will be excluded
After being blocked in the Council for a decade, EP and EU countries’ negotiators finally agreed on a bill to increase the presence of women on corporate boards.
The provisional agreement reached on Tuesday night on the draft legislation aims to ensure gender parity on boards of publicly listed companies in the EU.
At least 40% of non-executive directors should be women
The so-called “Women on Boards” Directive aims to introduce transparent recruitment procedures in companies, so that at least 40% of non-executive director posts or 33% of all director posts are occupied by the under-represented sex. Thanks to Parliament, companies must comply with this target by 30 June 2026, compared to the Council’s proposal of 31 December 2027. In cases where candidates are equally qualified for a post, priority should go to the candidate of the under-represented sex.
MEPs insisted that merit must remain the key criterion in selection procedures, which should be transparent, as part of the agreement. Listed companies will be required to provide information to the competent authorities once a year about the gender representation on their boards and, if the objectives have not been met, how they plan to attain them. This information would be published on the company’s website in an easily accessible manner.
Small and medium-sized enterprises with fewer than 250 employees are excluded from the scope of the directive.
Penalties
The proposal includes effective, dissuasive and proportionate penalties for companies that fail to comply with open and transparent appointment procedures. Parliament succeeded in including examples of specific penalty measures, such as fines and companies having their selection of board directors annulled by a judicial body if they breach the national provisions adopted pursuant to the Directive.
Quotes by the rapporteurs
Evelyn Regner (S&D, AT), co-rapporteur, said: “Parliament has been asking for a Directive for more women on boards for over a decade. The Council was finally ready to come to the table 10 years after the Commission made its proposal. It was high time to have binding measures. More women on boards make companies more resilient, more innovative and will help to change top-down structures in the workplace. One of the main achievements is transparency. Selection processes have to be based on clear, predetermined criteria and with this agreement, only the best candidates will be selected, thereby improving the overall quality of boards.”
Lara Wolters (S&D, NL), co-rapporteur, added: “All data show that gender equality at the top of companies is not achieved by sheer luck. We also know that more diversity in boardrooms contributes to better decision-making and results. This quota can be a push in the right direction for more equality and diversity in companies.”
Press conference
The lead EP negotiators Evelyn Regner (S&D, AT) and Lara Wolters (S&D, NL) will answer journalists’ questions on the deal on Wednesday 8 May at 9.00 CEST in the Daphne Caruana Galizia room (WEISS N -1/201) in the European Parliament in Strasbourg. More details on how to follow the press conference are available here.
Next steps
Once Parliament and Council have formally approved the agreement, the Directive will enter into force 20 days after it has been published in the EU’s Official Journal. Member states would need to implement the directive two years after it has been adopted. Parliament succeeded in including an assessment on the scope of the directive at a later stage on whether non-listed companies should be included in the scope of directive.
Background
The European Commission first presented its proposal in 2012 and the European Parliament adopted its negotiation position back in 2013. The file was blocked in the Council for almost a decade, until Employment and Social Affairs ministers finally agreed on a position last March.
Today, only 30.6% of board members in the EU’s largest publicly listed companies are women, with significant differences among member states (from 45.3% in France to 8.5% in Cyprus).
Further information
EU Council on the agreement to improve gender balance on company boards
7 June 2022
The Council and European Parliament today reached a provisional political deal on a new EU law promoting a more balanced gender representation on the boards of listed companies.
Over the past 10 years, some progress towards equality in boardrooms has been made across the EU. Yet progress has been uneven and in October 2021, on average, only 30.6% of board members and a mere 8.5% of board chairs were women (up from 10.3% and 3% in 2011).
The Council and European Parliament therefore agreed that listed companies should aim to have at least 40% of their non-executive director positions held by members of the under-represented sex by 2026. If member states choose to apply the new rules to both executive and non-executive directors, the target would be 33% of all director positions by 2026.
In the case of member states that do not reach these targets, listed companies will have to put in place transparent procedures for the selection and appointment of board members designed to rectify the situation – such as a comparative assessment of the different candidates on the basis of clear and neutrally formulated criteria.
Possible national adjustments
A country which, before the entry into force of the directive, has either achieved progress coming close to the objectives or put in place equally effective legislation, can suspend the directive’s requirements related to the appointment or selection process.
Business benefits
Evidence has shown that more balanced boards make better decisions. Having more women in economic decision-making positions is also expected to boost gender equality within companies and society more generally. Allowing both women and men to fulfil their potential is crucial for economic growth and competitiveness in Europe.
Background and next steps
At the Council meeting of 14 March 2022, ministers of employment and social affairs reached a general approach, which cleared the way for negotiations with the European Parliament to start. Since then, three rounds of negotiations (trilogues) with the Parliament have taken place.
Within the Council, the agreement will first be submitted to Coreper for approval before going through the formal adoption procedure.
Gender balance on company boards (policy page)
S&D: Women on Boards Directive: landmark agreement to guarantee diversity and equality at the top
Tonight the European Parliament’s two negotiators, S&D MEPs Evelyn Regner and Lara Wolters, reached an agreement with the EU Council on the Women on Boards Directive. For over a decade, the S&D Group has led the calls for this landmark law to improve gender equality among both non-executive and executive directors of companies in the EU.
The Women on Boards Directive will introduce an open and transparent procedure to reach a minimum of 40% of women on non-executive boards of EU companies by the end of June 2026 with binding measures to achieve that goal. For member states that introduce quotas in both executive and non-executive boards, the overall minimum requirement will be 33%. Member states will also have to set up a penalty system for companies failing to comply with the rules.
Evelyn Regner MEP, the European Parliament’s negotiator on the Women on Boards Directive in the women’s rights and gender equality committee, said:
“I am incredibly happy and proud, because we the Socialists and Democrats took the lead in this important file, which will make a concrete difference for women! For too long we have been wasting women’s talent and opportunities in European business.
“This directive for more women on boards everywhere in the European Union is a major step that took us 10 years to achieve. But since I first worked on the proposal in 2012, we have progressed and now we have a directive for equal chances, fair selection processes and finally more women in the decision-making of companies! All this is only the first step of many but one that the S&Ds can be proud of.”
Lara Wolters MEP, the European Parliament’s negotiator on the Women on Boards Directive in the legal affairs committee, said:
“All the data shows that gender equality at the top of companies is not achieved by sheer luck. We also know that more diversity in boardrooms contributes to better decision-making and results. Despite years of roadblocks, I’m proud to have pushed member states to finally agree to this “women on boards” milestone that will push for progress in 27 member states at once.”
Note to editors:
Currently only 9 out of 27 member states have national legislation regarding gender equality on boards. Those member states who demonstrably already have effective national legislation would be able to suspend the measures in this directive in very specific circumstances, subject to regular review from the European Commission to ensure they are achieving the same target of 40%.
The selection procedures of companies will need to be adapted to include clear pre-determined criteria. In case there are two candidates with the same qualifications, the candidate from the under-represented sex would be selected.
The most recent figures published in December 2021 by the European Institute for Gender Equality show that the share of women on the boards of the largest publicly listed companies in the EU has increased to 31.3%, from 11.9% in 2010. However, seven in 10 board members are still men. The gap is even bigger if we take into account just CEOs, both executive and non-executive, with 79.2% men and just 20.8% women.
The European Commission presented the proposal back in 2012 and the European Parliament already adopted its position in 2013. After years of resistance in a conservative-dominated Council, the directive was unblocked by member states shortly after a new progressive German government was formed earlier this year.
Source – S&D via e-mail