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BEERG Newsletter - EU: Deal agreed on board gender balance

Agreement has been reached 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. According to the Commission, 

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 appointment procedures are clear and transparent, and that applicants are assessed objectively based on their individual merits, irrespective of gender.

The agreed Directive will push gender balance on corporate boards of listed companies 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). 

Once formally adopted, member states will have two years in which to transpose the Directive into national law. 

Published on: June 8, 2022

Authors: Tom Hayes

Topics: Inclusion and Diversity, The UK and European Union

Tom Hayes

Director of European Union and Global Labor Affairs, HR Policy Association

Detailed Bio

Contact Tom Hayes LinkedIn

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