European Commission approves 40% women on boards ‘objective’

The European Commission has given its backing to proposals that would see listed companies in the EU handed an objective of having at least 40 per cent female boardroom representation by 2020.

However, it stopped short of calling for the introduction of legally binding quotas for the number of women on boards, which had been put forward by some as the best way to improve equality, diversity and inclusion at executive level.

Instead, individual governments of EU member states will be tasked with imposing “appropriate and dissuasive sanctions” for companies that fail to meet the objective, the exact nature of which will be left up to them.

Furthermore, companies would not face sanctions for simply missing the target and would only be punished if they missed the objective and had no procedures in place to try to meet it.

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Under the directive, companies whose boards fall short of the 40 per cent objective will be required to favour female candidates in situations where two or more potential appointees are otherwise equally qualified.

The rules will not apply to businesses with fewer than 250 employees or turnover less than €50 million. Non-listed companies will also not be asked to comply.

The proposals were put forward by EU justice commissioner Viviane Reding, who was forced to water down her initial proposals for an enforceable quota due to concerns over its legality and opposition from member states.

“This measure is there to swiftly bring about gender equality in Europe’s corporate boardrooms,” she commented.

However, others have been left disappointed by the Commission’s failure to take more forceful measures to increase female representation in the boardroom.

Fiona Hotston Moore, a partner at London accountancy firm Reeves and a campaigner for enforceable quotas, said: “The quota proposals are very weak and fall disappointingly short of what is needed to redress bias against women.

“They only apply to non-executive directors and will encourage more tokenism. We need mandatory quotas for a fixed period of time to get the balance right.