European Parliament votes for mandatory female board representation

The European Parliament has approved a law requiring the inclusion of a minimum of 40 percent women on non-executive European company boards by 2026.

The vote follows an agreement between the European Council and European Parliament in June to improve gender balance on company boards, where co-legislators reached a provisional decision. The European Council approved the law last month.

Small and medium-sized enterprises with fewer than 250 employees will be excluded from the legislation.

The announcement was led by European Parliament president Roberta Metsola, along with the co-rapporteurs on the adoption of Women on Boards directive: Evelyn Regner, a vice-president of the European Parliament, and member of Austria’s delegation in the Progressive Alliance of Socialists & Democrats (S&D), a centre-left political group in the parliament; and Lara Wolters, MEP and policy adviser for the Netherlands’ S&D delegation.

The Women on Boards directive will introduce quotas for member states on both executive and non-executive boards, with 33 percent female representation as the overall minimum requirement.

“After 10 years of obstruction by member states, three mandates, five parliament rapporteurs and 21 council presidencies, I’m happy that we are going to put our signature to this tomorrow,” Wolters said after the vote.

Member states will be required to implement a penalty system, such as fines, for companies that fail to comply with the new law.

“With this directive, we’ve paved the way for fair and transparent hiring processes across Europe which will give women the same chance of being recruited for the top jobs as men, as well as ensuring that qualification matters, not informal networks,” said Regner.

The directive will enter into force on the 20th day following its publication in the Official Journal of the European Union. Member states will have two years to adopt the measures.

The European Commission first proposed the directive to improve gender representation on company boards in 2012. The initial proposal set targets for public sector companies to reach 40 percent female board representation by 2018 and for private sector firms by 2020.

The proposal has been discussed by the European Council several times over the past 10 years, but only reached a final agreement this year.

In January 2022, the European Commission president and the French presidency expressed their determination to move forward with the directive, which was included in the Joint Declaration on EU Legislative Priorities for 2022.

At the meeting of the Employment, Social Policy, Health and Consumer Affairs Council in March 2022, ministers agreed on a general approach on the draft directive, opening the opportunity for negotiations.

Just 31.5 percent of board members at the EU’s largest publicly listed companies are women – with significant disparity among member states – and only 8 percent of board chairs, according to 2022 research from the European Institute for Gender Equality.

As of 2022, France, Italy, Belgium, Portugal, Germany, Austria, Greece and the Netherlands – a new addition this year – had national gender quotas in place. As of 2021, Denmark, Estonia, Ireland, Spain, Luxembourg, Poland, Romania, Slovenia, Finland and Sweden had soft measures in place. The remaining member states – Bulgaria, Czech Republic, Croatia, Cyprus, Latvia, Lithuania, Hungary, Malta and Slovakia – had no measures in place.

The UK’s Financial Conduct Authority also brought in new rules on board representation earlier this year, for which disclosures will take effect on 1 April next year. They also require companies to have 40 percent female representation on their boards, as well as a minimum of one woman in a senior board position, and at least one board member from an ethnic minority background.