PURPOSE: ensuring more balanced representation of men
and women among non-executive directors of companies listed on
stock exchanges.
PROPOSED ACT: Directive of
the European Parliament and of the Council.
BACKGROUND: company boards in the EU are characterised
by persistent gender imbalances, as evidenced by the fact that only
13.7% of corporate seats in the largest listed companies are
currently held by women (15% among non-executive directors).
Progress in increasing the presence of women on company boards has
been very slow, with an average annual increase in the past years
of just 0.6 percentage points.
The divergence or the absence of regulation at
national level does not only lead to the discrepancies in the
number of women among executive and non-executive directors and
different rates of improvement across Member States, but also poses
barriers to the internal market by imposing divergent corporate
governance requirements on European listed companies.
- The European Commission reaffirmed its support for an
increased participation of women in positions of responsibility,
both in its Women's
Charter and its Strategy
for Equality between Women and Men 2010-2015.
- In the European Pact for Gender Equality
2011-2020, adopted on 7 March 2011, the Council acknowledged
that gender equality policies are vital to economic growth,
prosperity and competitiveness and urged action to promote the
equal participation of women and men in decision-making at all
levels and in all fields.
- The European Parliament, in its resolutions of 6
July 2011 and 13
March 2012, called upon companies and Member States to increase
female representation of women in decision-making bodies and
invited the Commission to propose legislative quotas to attain the
critical threshold of 30 per cent female membership of management
bodies by 2015 and 40 per cent by 2020.
- The European social partners have reaffirmed
their commitment to further action in this area in their work
programme for 2012-2014.
IMPACT ASSESSMENT: the Commission analysed five
policy options:
- Option 1: the baseline
scenario (i.e. no further action at EU level);
- Option 2: a Commission
Recommendation encouraging Member States to achieve the objective
of at least 40% of board members of each gender by
2020;
- Option 3: a Directive
introducing a binding objective of at least 40% of each gender by
2020 for non-executive directors;
- Option 4: a Directive
introducing a binding objective of at least 40% of board members of
each gender by 2020 for non-executive directors and a flexible
objective for executive directors, which would be set by the
companies themselves;
- Option 5: a Directive
introducing a binding objective of at least 40% of board members of
each gender by 2020 for both executive and non-executive
directors.
The outcome of the comparison of the consequences of
the different policy options was that (i) binding measures are more
effective in meeting the policy objectives than non-binding
measures, (ii) measures that target both executive and
non-executive board members are more effective than measures only
targeting one group and (iii) binding measures will generate more
societal and economic benefits than non-binding measures. The
proposal is therefore based on Option 4.
LEGAL BASIS: Article 157(3) of the Treaty on the
Functioning of the European Union (TFEU).
CONTENT: the purpose of the proposal is to
substantially increase the number of women on corporate boards
throughout the EU by setting a minimum objective of a 40%
presence of the under-represented sex among the non-executive
directors of companies listed on stock exchanges and by
requiring companies with a lower share of the under-represented sex
among the non-executive directors to introduce pre-established,
clear, neutrally formulated and unambiguous criteria in selection
procedures for those positions in order to attain that objective
by 1 January 2020. A shorter deadline for achieving the
objective (1 January 2018) is set for listed companies which are
public undertakings.
The proposal:
- specifies the method of calculation of the
exact number of non-executive director positions necessary to meet
the 40% objective;
- imposes a preference rule with the aim of
meeting the objective: in the presence of equally qualified
candidates of both sexes, priority shall be given to the candidate
of the under-represented sex unless an objective assessment taking
account of all criteria specific to the individual candidates tilts
the balance in favour of the candidate of the other sex. This
procedural requirement is necessary to ensure that the objectives
comply with the case-law of the Court of Justice of the European
Union concerning positive action;
- imposes a disclosure obligation and a burden of
proof rule applicable in cases of challenges to the selection
procedure by an unsuccessful candidate;
- provides for a possibility of justifying
non-compliance with the objective where the members of the
under-represented sex represent less than 10 per cent of the
workforce;
- provides that the 40% objective can also be met where
the members of the under-represented sex hold at least one third of
all director positions, irrespective of whether they are executive
or non-executive;
- imposes an obligation for listed companies to
undertake individual commitments regarding the
representation of both sexes among executive directors;
- imposes an obligation for listed companies to
provide and publish information on the gender composition of
their boards;
- imposes on listed companies which fail to meet the
objectives concerning the non-executive directors or commitments
concerning executive directors an additional obligation to
explain the reasons and to include the description of
measures taken and planned in order to meet the objectives or
commitments in the future;
- obliges Member States to lay down rules on
sanctions applicable in case of breach of this
Directive.
BUDGETARY IMPLICATION: the proposal has no
implications for the Union budget.