Women on Board : EU directive that hopes to bring gender balance

Moves at European Union level to introduce quotas for women on the boards of listed companies continue, if slowly. In June, the EU issued a progress report on its draft EU Gender Directive.

The draft Directive, which does not yet have unanimous support amongst Member States, would require Member States to set a target for women directors on the boards of listed company. If the target is to relate only to non-executives it would be 40%.  If it relates to both executive and non-executive directors it would be 33%. Companies would have to report annually on their gender representation at board level.

Who will the quota apply to? At present it will apply to listed companies registered in the EU with more than 250 employees and a turnover in excess of Euro 50M.

Will positive discrimination be permitted? No, appointments must be based on “pre-established, clear, neutrally formulated, non-discriminatory criteria”. However, positive supportive action may be permitted.

What will the sanctions be? These can be set by the individual Member States provided they are “effective, proportionate and dissuasive”. They should include some exclusions from public tenders.

There are differing views on the value of quotas systems.  A number of EU states have already introduced their own gender re-balancing measures. Norway was the first European country to introduce women quotas.  In 2003 it set a quota of 40% for women on corporate boards.  It now tops The Economist’s Glass Ceiling index while the UK (which has not introduced quotas) sits 5 places below the OECD average, next to Italy. However, according to a study published in June by the US National Bureau of Economic Research, while the Norway quota ensured more women on corporate boards, it has had no discernible impact on women in business in general in Norway. It had been hoped at the outset there would be a trickle-down effect.

The June EU progress report admits that while the Member States do favour in principle improving gender representation on boards, a number of States think it should be left to individual countries to decide how. More work will therefore be needed before a compromise is reached.

Rather than refer to women, the EU Gender Directive refers to the “under–represented” sex, thus ensuring that should a time come when men are under-represented on corporate boards the directive will effortlessly come to their aid.