EU Gender Directive: 40% non-executive directors on EU largest listed companies by 2020 - EU Committees vote in favour of draft Directive

The EU Committees on Women's Rights and Gender Equality and Legal Affairs voted today in favour of a joint report on the draft EU directive which will require EU-listed companies to ensure, by 2020, that at least 40% of their non-executive board members are women, so as to promote gender equality in economic decision making. We previously reported on the opinion of the Committee on Economic and Monetary Affairs on this draft Directive published last month.

40% target for listed company boards

MEPs backed a European Commission proposal to ensure gender balance on boards for publicly-listed companies. They called on these companies to ensure that at least 40% of their non-executive board members represent the under-represented sex. Listed companies would have until 2020 to reach the target while public ones should do so by 2018.

According to the draft proposal, the Directive would not apply to small and medium-sized enterprises. However MEPs encouraged member states to support SMEs and give them incentives to improve gender balance on their boards too. MEPs further proposed that these rules should also apply to companies where less than 10% of the workforce is of the under-represented sex.

Transparent and gender-balanced recruitment procedure

MEPs called for a transparent, open and meritocratic recruitment procedure in which gender balance is integral to the process. Where candidates are equally well qualified, priority should go to the candidate of the under-represented sex. However, MEPs stressed that qualifications and merit should remain the key criteria.

Penalties for breaching transparency requirements

Companies that fail to abide by the rules will be required to explain why this is and describe the measures taken and what they plan to achieve in future. MEPs say that penalties, such as fines, should be imposed for failing to follow transparent and open appointment procedures, rather than for failing to achieve the target. They propose that exclusion from public tenders should be added to the list of possible penalties, which they say should be mandatory, rather than indicative, as the Commission proposes.

Next steps

The Committee negotiators received a mandate to start negotiations with EU ministers.

Article written by Jemima Coleman, Professional Support Lawyer