The European Union (EU) has reached an agreement to impose gender quotas on the boards of large companies – those with more than 250 employees.
After a decade of stalemate, renewed support from Germany and France secured the backing of all 27 EU member states
Ursula von der Leyen, president of the European Commission, said: “Diversity is not only a matter of fairness. It also drives growth and innovation. The business case for having more women in leadership is clear.
“After 10 years, since the Commission proposed this directive, it is high time we break the glass ceiling. There are plenty of women qualified for top jobs. They should be able to get them.”
The EU says current female board representation stands at 33% for non-executive directors, and lower for executive directors.
How will the EU gender quota work?
The quota is based in each case on the ‘under-represented sex’, which will typically apply to females. All member states will be required to appoint women to at least 40% of non-executive board seats or 33% of all director roles by June 2026.
However, European MPs insisted merit must remain the key factor in selection procedures, which should be transparent.
Listed companies will be required to provide information about gender representation on their boards and, if the objectives have not been met, their plan to achieve them. This information will also be published on company websites.
Small and medium-sized enterprises with fewer than 250 employees are excluded from the quota regulations. Companies not complying with the quota rules may be fined or contested board appointments may be annulled.
What’s the current female board representation?
France has the highest female representation of 45%, followed by Italy and the Netherlands, all of which currently have quotas for female board representation. This compares to 38% for the UK and 27% for the US (according to Moody’s Investor Service).
By comparison, Hungary, Estonia and Cyprus currently have less than 10% female representation on boards.
Does the UK have a similar quota for female representation?
A recent report by Delotte revealed that the proportion of women on FTSE 100 boards has tripled from 12% in 2010 to 36% in 2022. However, the report also referenced the gender disparity in the chairperson and chief executive officer positions, with women holding only 15% and 8% of these positions respectively.
To address gender disparity on boards, the Financial Conduct Authority announced diversity targets for listed companies in April, applying to accounting periods starting from 1 April 2022. These diversity targets include:
- at least 40% of the board should be women
- at least one of the senior board positions (Chair, Chief Executive Officer, Chief Financial Officer or Senior Independent Director) should be a woman.
Companies must provide an explanation if they fail to meet these quotas, although there is flexibility for smaller and overseas firms.
