EU Lawmakers Set Board Diversity Requirements
The Council and European Parliament announced today an agreement on a new law setting targets for EU companies to improve gender balance on corporate boards. The new directive would promote increased representation of women on boards, targeting at least 40% of non-executive director positions, and 33% of all board positions, by 2026.
According to the European Commission, 60% of current university graduates are female but women are underrepresented in corporate boards, accounting for only 30.6% of board members and 8.5% of board chairs. Representation has improved significantly over the past decade, however, from only 10% representation of women on boards in 2011.
Helena Dalli, Commissioner for Equality, said:
“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.”
The Council and the European Parliament agreed that EU companies listed on the EU stock exchange should strive to have at least 40% of their non-executive director positions held by women by 2026 and if member states choose to apply the new rules to both executive and non-executive directors, the target should be 33% of all director positions by 2026.
In addition to the targets, the initiative introduces transparent board appointment procedures. In cases where the objectives are not reached, companies must report on the reasons, and on the measures being taken to address the shortcoming, and preference has to be given to women when two candidates of different sexes are equally qualified. Penalties for failure to comply could include fines or annulment of directors’ appointments.
Ursula von der Leyen, President of the European Commission, 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 new agreement is subject to formal approval by co-legislators and once it enters into force, Member States will need to transpose its elements into national law within two years.