European Commission proposes 40% objective for Women on Boards

“The European  Commission has proposed legislation with the aim of attaining a 40% objective of women in non-executive board-member positions in publicly listed companies, with the exception of small and medium enterprises.
Currently, boards are dominated by one gender: 85% of non-executive board members and 91.1% of executive board members are men, while women make up 15% and 8.9% respectively. Despite an intense public debate and some voluntary initiatives at national and European level, the situation has not changed significantly in recent years: an incremental average increase of the number of women on boards of just 0.6 percentage points per year has been recorded since 2003. 

The proposed Directive sets an objective of a 40% presence of the under-represented sex among non-executive directors of companies listed on stock exchanges. Companies which have a lower share (less than 40%) of the under-represented sex among the non-executive directors will be required to make appointments to those positions on the basis of a comparative analysis of the qualifications of each candidate, by applying clear, gender-neutral and unambiguous criteria. Given equal qualification, priority shall be given to the under-represented sex. 
The objective of attaining at least 40% membership of the under-represented sex for the non-executive positions should thus be met by 2020 while public undertakings – over which public authorities exercise a dominant influence – will have two years less, until 2018. The proposal is expected to apply to around 5 000 listed companies in the European Union. It does not apply to small and medium-sized enterprises (companies with less than 250 employees and an annual worldwide turnover not exceeding 50 million EUR) or non-listed companies.

General Factsheets

Just 1 in 7 board members (13.7%) at Europe’s top companies is a woman. This is only a slight improvement from 11.8% in 2010. At this slow rate of progress it would still take around 40 years to even get close to gender balance in boardrooms (at least 40% of both sexes).
As a consequence, several EU Member States have started to introduce different types of laws for company boards. 11 Member States (Belgium, France, Italy, the Netherlands, Spain, Portugal, Denmark, Finland, Greece, Austria and Slovenia) have introduced legal instruments to promote gender quality on company boards. In eight of these countries, legislation covers public undertakings (see factsheet with country-specific overview). 
Meanwhile, a further 11 EU countries have neither self-regulation measures nor legislation in place.
This legally fragmented approach risks hampering the functioning of Europe’s Single Market, as different company law rules and sanctions for not complying with gender balance laws can lead to complications for businesses and have a deterrent effect on companies’ cross-border investments.

A growing number of studies suggest gender balanced boards have the potential to improve the financial performance of companies. Having more women in top jobs can contribute to a more productive and innovative working environment and improved company performance overall. This is mainly due to a more diverse and collective mind-set which incorporates a wider range of perspectives and therefore reaches more balanced decisions. In addition, women account for 60% of new university graduates but only few make it to the top of companies. Opening the door to senior positions will act as an incentive for women to enter and stay in the workforce, helping to raise female employment rates.

Having more women in the workforce will help achieve the target set by the Europe 2020 Strategy – the EU’s growth strategy – to raise the employment rate for women and men aged 20-64 to 75% by 2020.”

Tags: , , , , , , , , , ,