EU: 40% Quota for Women on the Boards of Large Companies by 2026

World » EU | June 10, 2022, Friday // 09:10
Bulgaria: EU: 40% Quota for Women on the Boards of Large Companies by 2026 @Pixabay

The European Union has agreed to introduce gender equality quotas to ensure that women hold at least 40% of the seats on the boards of large companies.

After a decade of stagnation on the issue, the proposal received a new impetus this year with new support from Germany and France, and a political agreement was finally reached between the European Parliament and the Council of the EU on Tuesday.

Legislation requires listed companies in all 27 EU Member States to hold at least 40% of non-executive board positions or 33% of all board directorships by mid-2026.

Companies can be fined for not hiring enough women on their boards, and director appointments can be revoked for non-compliance.

"Diversity is not just a matter of justice. It is also a driver of growth and innovation. The business arguments in favor of more women in management positions are clear," said European Commission President Ursula von der Leyen. "There are enough highly qualified women who are suitable for senior positions: they must be able to hold them."

Uneven progress

Last year, European data showed that women held 30.6% of board positions in the bloc as a whole, but this share varied considerably from country to country: in Cyprus, 8.5% were women on boards and more than 45% in France. .

France first introduced legal targets for women's participation in boards in 2011. Its own quota of 40 percent was introduced in 2017. Today, it is the only EU country to exceed that figure, according to the European Institute for Gender Equality. (EIGE).

Italy, the Netherlands, Sweden, Belgium and Germany are the next best in the class with between 36 and 38.8 percent of women on boards. Hungary, Estonia and Cyprus are far behind, with less than one in 10 non-executive directors being women.

In April, EIGE said mandatory quotas had proved more effective in including more women on boards than countries that had taken softer or no action.

What will change?

The so-called "Women on Boards of Directors" directive applies to companies with at least 250 employees.

It aims to introduce transparent recruitment procedures in companies, so that at least 40% of non-executive directors or 33% of executive and non-executive positions taken together are held by the under-represented sex - usually women.

In cases where candidates are equally qualified for a particular position, priority should be given to the candidate of the under-represented sex.

Registered companies will be required to provide annual information to the competent authorities on gender representation on their boards and, if the targets are not met, how they plan to achieve them.

"More women on boards are making companies more sustainable, more innovative and will help change top-down structures in the workplace," said co-author of the directive, Austrian Social Democrat MP Evelyn Regner.

"Selection processes must be based on clear, pre-defined criteria, and this agreement will select only the best candidates, thus improving the overall quality of the boards."

Companies will face fines

Member States will have to transpose the directive into national law over the next two years.

Companies, for their part, will have to comply with the new target by 30 June 2026. This is a shorter period than the Council's proposal of 31 December 2027.

The EU proposal includes "effective, dissuasive and proportionate" penalties for companies that fail to meet selection and reporting obligations.

Member States will also need to publish information on companies that are achieving their goals, as a form of partnership pressure and to promote compliance.

The European Parliament has called for a later assessment of the scope of the directive on whether it should include non-listed companies.

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