More women in board rooms: EU to boost gender equality in companies

More women in board rooms: EU to boost gender equality in companies
Credit: PXhere

On Tuesday, the EU took a decisive step toward gender equality, after the European Parliament (EP) and Member State negotiators agreed on a bill to increase the presence of women in board rooms.

In a case of affirmative action, the draft legislation was finalised on Tuesday night, with its stated aim to ensure better gender equality on the boards of publicly listed companies in the EU.

"All data show that gender equality at the top of companies is not achieved by sheer luck, " said co-rapporteur Lara Wolters, from the EP's Socialists & Democrats (S&D) bloc. "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."

Minimum 40% women

The 'Women on Boards' Directive will 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.

Parliament ensured that companies must comply with the directive by 30 June 2026, while the European Council had proposed 31 December 2027. If candidates are equally for a post, priority should go the candidate of the under-represented sex.

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MEPs insisted that merit stays a key criteria during a transparent selection procedure, while listed companies will be required to provide information to authorities once a year about gender representation on their boards.

If the goals haven't been met, the companies will be required to show how they plan to achieve them. Information should be easily accessible and published on a company's website.

Small and medium-sized enterprises with less than 250 employees are excluded from the directive. Penalty for non-compliance includes finances and companies having their selection of board directors annulled by a judicial court.

Do we have a deal?

The provisional agreement is not a done deal yet, but once the Parliament and Council formally approved it, the Directive will come into force 20 days after it is part of the EU's Official Journal. Member States will have two years to implement the directive once it has been adopted.

Only 30,6% of board members in the EU's largest publicly listed companies are women, with large gender disparities between member states. France has the highest amount of women in its board rooms with 45.3%, while Cyprus has just 8.5%.

The issue of quotas is a political hot-button issue, which explains why it has taken so long for an agreement on the Directive, despite the European Commission first presenting it in 2012. Some believe that quotas lead to hiring unqualified candidates purely on the basis of their gender.

However, there has been growing recognition that without more efforts, the situation will not change. Many women are met by unconscious bias in recruitment procedures as well as issues surrounding unpaid work at home and balancing families with demanding careers, which disables them from achieving top posts.

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