• Professional News
  • 15 November 2012

40% female quota for non-executive directors

Women must account for 40% of non-executive board members in public listed companies by 2020, proposes a European Commission directive.

The European Commission proposes the imposition of a 40% female quota for non-executive directors (i.e. excluding chairman and vice-chairman appointments) of public listed and state owned companies. Public listed companies must meet the target by 2020.

Companies, in which the underrepresented sex makes up less than 40% of the board, will be required to appoint future board members on the basis of a comparative analysis of each individual candidate’s qualifications. This appointment must take place on the basis of clear, gender neutral and unambiguous criteria. In the event of similar qualifications, the underrepresented gender will be given preference.

The proposal does not encompass small and medium-sized businesses (businesses with less than 250 employees having annual worldwide revenue of EUR 50 million or less) or businesses which are not listed.

EU Member States will be obliged to introduce appropriate deterrent sanctions against companies not complying with the 40% target.

Member States which have already taken measures for more balanced boards will be able to maintain such measures, provided they can demonstrate that such measures are of “equal efficacy” to reach the objective of the European Commission’s proposed directive.

Concurrent Danish process

On 3 October 2012, the Danish Parliament submitted a Bill amending the law on gender equality, proposing the introduction of rules on target figures and policies on the gender composition of boards of directors for public institutions and companies, for a first reading. At present, the Bill is being considered by legislative committees prior to its second reading.

The Bill proposes, among other things, that:

  • Denmark’s 1,100 largest businesses be obligated to lay down target figures for the percentage of the underrepresented gender that should form part of the supreme management body of such businesses
  • Such businesses be obligated to adopt a policy to increase the share of the underrepresented gender on all other management levels, and to report on the status of compliance with gender targets in their annual reports
  • National institutions and businesses be obligated, irrespective of their size, to lay down similar target figures, whereas businesses and institutions having more than 50 employees be obligated to prepare a policy for the purpose of increasing the number of female executives.

Since the Bill does not require that the underrepresented gender occupy 40% of non-executive directorships, it is doubtful whether the Danish Bill will be in accordance with the directive proposed by the Commission.

The European Commission’s proposed directive (as per 14 November 2012) can be read in its entirety here.

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