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31/08/2016

MEPs back 40% quota for women on company boards

Social Europe & Jobs

MEPs back 40% quota for women on company boards

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Two European Parliament committees backed the Commission’s proposal to have 40% women on company boards, but failed to extend it to executive boards.

The European Commission’s proposal aimed at ensuring gender balance on company boards in Europe received overwhelming support from two Parliament committees yesterday (14 October).

The women’s rights and gender equality committee and the legal affairs committee approved the proposal for a directive, presented by Justice and Fundamental Rights Commissioner Viviane Reding in November 2012.

The proposal requires publicly listed European companies to make sure that by 2020 at least 40% of their non-executive board members are female.

However, the vote excluded small and medium enterprises – companies with less than 250 employees or less than €50 million revenue – from the legislation.

“What is currently a reality in some EU member states will soon be extended to the single market as a whole and all EU listed companies, thereby making the most of the talents of many qualified and highly skilled women," said MEP Rodi Kratsa-Tsagaropoulou.

MEPs also voted in favour of sanctions against companies that do not comply with the rules. The rule will require companies to explain the infringement to the authorities and commit to achieving the quota in the future through concrete measures.

Fines “should be imposed for failing to follow transparent and open appointment procedures, rather than for failing to achieve the target”, reads a Parliament statement. "Companies that don’t comply should be mandatorily excluded from public calls for tenders”, MEPs proposed.

Even though the outcome of the vote was clear (40 in favour, 9 against), some politicians expressed disappointment. Greens’ equality spokesperson Marije Cornelissen welcomed the vote but added that “MEPs missed the opportunity” to extend the legislation to executive boards.

"In spite of all the lip service, women are still grossly under-represented on the boards of large European companies, with the share of women in the highest decision-making bodies of the largest publically-listed companies at a mere 16.6%," she said.

"This is not because of a shortage of qualified women, with 60% of university graduates in the EU being women, but because the voluntary approach has unfortunately failed.  Binding obligations for companies have already proven successful in addressing this equality gap in European countries and it is time we built on this success by introducing binding EU-level legislation.”

Positions

Vice-President Viviane Reding, the EU's Justice Commissioner said: "Regulatory pressure works. The cracks are starting to show on the glass ceiling. More and more companies are competing to attract the best female talent. They know that if they want to remain competitive in a globalised economy they cannot afford to ignore the skills and talent of women,"

MEP Evelyn Regner, who led the negotiations for the Socialists and Democrats Group, said: “An exemption for large family companies, as suggested by some of the conservative MEPs, was simply not acceptable. In this case, companies such as BMW and Lego would have been exempted from respecting the 40% target. We have ensured harsher penalties for companies failing to meet the 40% target. The S&D Group has successfully expanded the list of sanctions to exclusion from structural funds and from public calls for tenders.”

Marije Cornelissen from the Greens welcomed the vote by saying that it "moves us one step closer to realising equality in company boardrooms. MEPs have recognised that self-regulation will not lead to significant improvements any time soon. With this legislation, companies will have to adjust their recruitment, selection and appointment procedures to increase female representation on their boards to at least 40% if they are below this level.

Background

On 14 November 2012, the Commission adopted a proposal for a directive setting a minimum objective of 40% of the under-represented sex in non-executive board-member positions in listed companies in Europe by 2020, or 2018 for listed public undertakings.

Main elements of the draft law: If a publicly listed company in Europe does not have 40 per cent of women among its non-executive board members, the new law will require it to introduce a new selection procedure for board members which gives priority to qualified female candidates.

The law places the emphasis firmly on qualification. Nobody will get a job on the board just because they are a woman. But no woman will be denied a job because of their gender either.

The law only applies to the supervisory boards or non-executive directors of publicly listed companies, due to their economic importance and high visibility. Small and medium enterprises are excluded.

Individual EU Member States will have to lay down appropriate and dissuasive sanctions for companies in breach of the Directive.

The law is a temporary measure. It will automatically expire in 2028.

The law also includes, as a complementary measure, a "flexi quota": an obligation for companies listed on a stock exchange to set themselves individual, self-regulatory targets regarding the representation of both sexes among executive directors to be met by 2020 (or 2018 in case of public undertakings). Companies will have to report annually on the progress made.

Timeline

  • November 2013: Vote in Plenary Session

Further Reading

European Institutions