EU Council Approves Law to Improve Gender Balance on Company Boards

The EU Council has given the final go-ahead to EU rules to promote more balanced gender representation on the boards of listed companies.

The directive, which will have to be transposed into national law, lays down that at least 40% of non-executive director positions in listed companies should be held by members of the underrepresented sex by 2026. If member states choose to apply the new rules to both executive and non-executive directors, the target would be 33% of all director positions by 2026.

The core of the directive stipulates that listed companies which do not achieve the objectives will need to adjust their selection process. They will have to put in place fair and transparent selection and appointment procedures, based on a comparative assessment of the different candidates on the basis of clear and neutrally formulated criteria. When companies have to choose between equally qualified candidates, they should give priority to the candidate of the underrepresented sex.

According to Marian Jurečka, Deputy Prime Minister and Minister of Labour and Social Affairs of Czechia, ‘The new rules will help to remove the obstacles women often face in their careers. I also believe that companies would greatly benefit from women realising their potential in decision-making positions. The positive impact of the measures will surely trickle down to all levels of national economies.’

A country which has either come close to achieving the objectives or put in place equally effective legislation before the directive enters into force, may suspend the directive’s requirements relating to the appointment or selection process.

Once a year, companies must provide information about the gender representation on their boards and the measures they are taking to achieve the 33% or 40% objective. Member states will publish a list of the companies that have achieved the directive’s objectives, also on an annual basis.

Equality of treatment and opportunities between women and men is among the principles set out in Treaties of the EU, as well as in the European Pillar of Social Rights, a manifesto proclaimed by the Council, European Parliament and European Commission in 2017.

The Employment and Social Affairs Council sealed its position on the new law on 14 March 2022. On 7 June, Council representatives and the European Parliament concluded their negotiations on a compromise text, which is now being formally adopted by the co-legislators.

Member states have two years following the entry into force of the directive to adopt the required national measures. The directive will enter into force on the 20th day following its publication in the Official Journal of the European Union. The directive still needs to be adopted by the European Parliament.

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