Member states adopt a general approach on an EU directive aiming to strengthen gender equality on corporate boards

Member states adopt a general approach on an EU directive aiming to strengthen gender equality on corporate boards. Employment and social affairs ministers today (14 March 2022) agreed a ‘general approach’ on proposed EU legislation aiming to improve the gender balance among non-executive directors of listed companies.

The directive aims to set a quantitative target for the proportion of members of the under-represented sex on the boards of listed companies.

Companies would thus have to take steps to reach, by 2027, the minimum target of having 40% of non-executive director positions held by members of the under-represented sex, or 33% if all board members are included. Companies that fail to reach these targets would have to apply clear, unambiguous and neutrally formulated criteria when appointing or electing directors.

Member states will also have to ensure that companies 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.

40% or 33%

Countries that have put in place measures such as national targets to achieve more balanced representation of women and men 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. The Council position also clarifies that it is up to member states (and not companies) to choose between the two proposed targets, namely 40% for non-executive directors or 33% for all board members.

Imbalance remains

Although progress has been made towards greater gender equality on corporate boards, this progress remains uneven. In October 2021, only 30.6% of board members and just 8.5% of board chairs were women. The gap between member states is wide. Those where measures have been put in place are making much faster progress than those in which they have not.

Increasing the proportion of women in economic decision-making positions is expected to have positive spill-over effects throughout the economy. Furthermore, around 60% of new university graduates in the EU are women. Improving the gender balance on company boards would thus also allow the large number of highly qualified women in Europe to realise their full potential.

Next steps

Today’s agreement (14 March 2022) between the member states paves the way for negotiations between the Council and the European Parliament with a view to agreeing a common position.