The aim of Reding's proposed directive, released yesterday (14 November), is to increase the gender diversity of corporate boards throughout the EU by setting a minimum objective of 40% female board members by 2020.
"This is a historical day for gender balance and equality," Reding said at a joint press conference with Olli Rehn, the commissioner responsible for economic and monetary affairs.
If adopted by the European Parliament and Council, the directive will apply to private companies listed on the stock exchange which have a percentage of women lower than 40% among non-executive directors.
This should be on the basis of a comparative analysis of the qualifications of each candidate, by applying "transparent and unambiguous criteria", in order to meet the 40% objective, the Commission said.
The proposal is expected to apply to around 5,000 publicly listed companies in the EU. It does not apply to businesses with fewer than 250 employees and an annual worldwide turnover of less than €50 million.
The 40% target is binding, but not reaching it does not mean that there will be sanctions against a company.
"If there is a binding objective, the question whether or not there will be sanctions depends on whether or not it's justified not to have reached that objective," an EU official said.
"If member states and companies show us that they have made all the necessary arrangements that we think should be sufficient to reach the 40%, and that despite all the efforts they have made in reaching out to qualified women through having a transparent election procedure and in giving preference to equally qualified women, then that would mean there would be no sanctions," the source added.
Breaking the glass ceiling
Reding said that after decades of empty promises and failed attempts at self-regulation, it was time for the European Commission to take action.
Today, men comprise 91% of executive board members, 85% on non-executive board members and 96.8% of the boardroom chairs. Women account for 60% of new university graduates.
"Today we are proposing a legislation to smash the glass ceiling that keeps talented women out of top jobs," Reding said.
Rehn said it was time to move from words to deeds on gender equality, explaining that he felt personally engaged.
"I wanted to be associated to this proposal first of all because of its goal of achieving a higher number of women in business leadership and economic business making. The other reason is the direct association to my portfolio of economic and monetary affairs ... There is a clear economic and business case to have more women in business leadership," Rehn said.
The Finnish commissioner referred to recent studies that have shown that gender-diverse companies perform better. They are also respected by stakeholders for showing commitment to equality and good corporate governance, Rehn added.
Eleven EU member states as well as the European Economic Area member state Norway have already introduced legal instruments to promote gender equality on company boards. In eight of these countries, the instruments cover public undertakings.
Meanwhile, in two-thirds of the member states, no legal measures were introduced and no significant progress has been made in recent years.
An EU source said that it still is up to a member state to decide whether or not they have the right system in place and if they want to keep it.
Reding's earlier proposal had met with strong opposition from other commissioners, Catherine Ashton, in charge of foreign policy, Connie Hedegaard, the climate commissioner, and Cecilia Malmström, responsible for home affairs.
The loudest critic of the earlier proposal was Neelie Kroes, the commissioner in charge of the digital agenda. But she changed her mind after Reding submitted her second proposal, saying in a statement yesterday that she she supported the goal of greater gender equality.