Last Monday, October 17, the Council gave its definitive approval to the new EU rules to promote more equal representation on the boards of directors of listed companies.
The Directive, which must be incorporated into National Law, establishes that by 2026, at least 40% of the non-executive directors of listed companies must be members of the less represented sex. If Member States choose to apply the new rules to both executive and non-executive directors, the target would be to reach 33% of all director positions by 2026. The heart of the Directive stipulates that listed companies that do not meet the objectives will have to adapt their selection processes. They will need to establish selection and appointment procedures that are fair and transparent and based on a comparative evaluation of the different candidates against clear criteria, formulated in a neutral way. When companies have to choose between two equally qualified candidates, they will give priority to the candidate of the less represented sex.
Reporting and possible adjustments at the national level.
Countries that are close to meeting the targets or that already have national regulations as effective as the Directive before the Directive enters into force may suspend the Directive’s requirements relating to appointment or selection processes. Once a year, companies must provide information on gender representation on their boards and the steps they are taking to reach the 33% or 40% target. Member States will publish, also annually, a list of companies that have achieved the objectives of the Directive.
Context and next steps.
Equal treatment and opportunities between women and men is one of the principles enshrined in the EU Treaties, as well as in the European Pillar of Social Rights, proclaimed by the Council, the European Council and the European Commission in 2017. The Employment and Social Affairs Council sealed its position on the new Directive on March 14, 2022. On June 7, representatives of the Council and the European Parliament concluded negotiations on a compromise text, which is now being formally adopted by both co-legislators. After the entry into force of the Directive, Member States will have two years to adopt the necessary national measures. The Directive will enter into force twenty days after its publication in the Official Journal of the European Union. The directive still needs to be adopted by the European Parliament.
The European Council adopts the Directive on gender equality on company boards.
