European Commission proposes Directive to increase women’s representation on boards

The European Commission has proposed a Directive to increase women’s representation in non-executive board-member positions to 40 per cent in publicly listed companies, with the exception of small and medium enterprises. Member States would be exempted from the proposed means to achieve this if they put in place measures to improve women’s representation on company boards before the Directive comes into force. However, these methods must achieve 40 per cent female representation by 1 January 2020, or 1 January 2018 for listed companies which are public undertakings.

The proposed Directive on ‘improving the gender balance among non-executive directors of companies listed on stock exchanges’ would require Member States to ensure that listed companies, where ‘members of the under-represented sex’ hold less than 40 per cent of the non-executive director positions on the board, make appointments on the basis of a ‘comparative analysis of candidates’ qualifications, applying pre-established, clear, neutrally formulated and unambiguous criteria. Where candidates are equally qualified, priority will be given to the under-represented sex. These measures are to attain a 40 per cent to 49 per cent membership by 1 January 2020 at the latest, or 1 January 2018 for listed companies which are public undertakings. Member States will have to lay down appropriate and dissuasive sanctions for companies in breach of the Directive. However, Member States which take measures to ensure a more balanced representation of women and men among the non-executive directors of listed companies before the Directive comes into force may suspend the application of the procedural requirements relating to appointments, provided that it can be shown that those measures enable members of the under-represented sex to hold at least 40 per cent of the non-executive director positions of listed companies.

The Commission’s proposal will now pass to the European Parliament and Council of the European Union (representing Member States’ national governments) for consideration under the normal legislative procedure or ‘co-decision procedure’ with the Council voting by qualified majority and the European Parliament voting by simple majority.

The Women and Equalities Minister, Maria Miller, has firmly rejected the EU’s suggestion that mandated quotas are the solution and challenged the idea that the debate should be focused on boardrooms, saying it is ‘vital we also focus on everyday families’. Mrs Miller stated that the Government’s voluntary approach is working as women have made up 44 per cent of FTSE100 Board appointments in the past six months.