A directive aiming to strengthen gender equality on corporate boards, initially proposed by the European Commission in 2012, is a step closer towards seeing the light of day.
The “general approach” recently adopted by the Council of Ministers towards this directive has paved the way for the next step in the legislative process towards its adoption.
The scope of this directive is to ensure that a quantitative target of the under-represented sex on boards of listed companies is reached. The ultimate aim is to improve gender balance among non-executive directors of listed companies and to counteract the glass ceiling which women still often face in the labour market.
Further to the position adopted by the Council, listed companies will be obliged to take steps to reach, by 2027, the minimum target of having 40 per cent of non-executive director positions held by members of the under-represented sex, or 33 per cent if all board members are included.
Those companies which fail to reach these targets must apply clear, unambiguous, and neutrally formulated criteria when appointing or electing directors. They will also be obliged to give priority to candidates of the under-represented sex when choosing between candidates who are equally qualified in terms of suitability, competence and professional performance.
Possible adjustments at national level have been proposed by the Council of Ministers. Hence, member states which have in place measures such as national targets to achieve a balanced gender representation may suspend the requirements of the directive in relation to the appointment or election of board members. The same applies for countries that have already made progress towards the targets set in the directive.
During the past 10 years during which the proposed directive has lain dormant, there have been no significant improvements in all member states in so far as gender equality on company boards is concerned
Furthermore, the Council of Ministers emphasised that it must be up to the member states, and not companies, to choose between the two proposed targets, namely 40 per cent for non-executive directors or 33 per cent for all board members.
The agreement by the Council of Ministers paved the way for negotiations between the Council and the European Parliament with a view to agreeing on a common position on the proposed directive. Indeed, the European Parliament’s Women’s Rights and Legal Affairs Committees have already provided their backing for talks to proceed with the Council of Ministers. The final decision should shortly be taken during the European Parliament’s plenary session.
Statistics show that only 30.6 per cent of board members in the EU’s largest publicly listed companies are women and just 8.5 per cent of board chairs are held by women. Indeed, various member states have over the past years made provision for gender quotas insofar as company boards are concerned. However, though progress has been made, this is not significant and definitely not across all of Europe.
Many are those who have voiced the opinion that EU-wide binding standards are necessary for all of Europe to move forward insofar as equal gender representation on company boards is concerned. Such a view is nonetheless not shared by all and a significant number share the opposing view that the imposition of quotas is not the correct way of addressing the under-representation of women on company boards and indeed could lead to increased costs and administrative burdens for companies.
Despite these conflicting views, what is non-debatable is the fact that during the past 10 years during which the proposed directive has lain dormant, there have been no significant improvements in all member states insofar as gender equality on company boards is concerned. Therefore, the status quo is definitely a non-starter should Europe really want to ensure that gender equality within the labour market ever becomes a reality.