European Union agrees on 40% quota for women on company boards

The European Union reached a political agreement on a law that would require listed companies to move toward 40% female representation in non-executive director positions by 2026. 

The European Commission, the bloc’s executive arm, first proposed the legislation in 2012 and formal adoption still requires approval by the parliament and the 27 member states, expected later this year. Currently, 30.6% of board members in the EU largest publicly listed companies are women and 8.5% of board chairs, according to an EU statement. 

Ursula von der Leyen has made gender equality a hallmark of her tenure as president of the commission, which is for the first time gender-balanced at the highest level of the so-called college. 

“The business case for having more women in leadership is clear,” von der Leyen said in a Tuesday statement. “There are plenty of women qualified for top jobs: they should be able to get them.”

If member states choose to apply the legislation to both executive and non-executive directors, the target would be 33% female representation. Listed companies will be required to report once a year about the gender representation on their boards and, if the objectives have not been met, how they plan to achieve them.

Currently, only 9 out of 27 member states have national legislation regarding gender equality on boards.

“The directive needs teeth,” Evelyn Regner, vice president of the European Parliament and the proposal’s co-rapporteur, said in a news conference on Wednesday. “So we put into it penalties.”

The penalties, which will have to be introduced and implemented at the national level, may include fines. Companies may also face having their selection of board directors annulled by a judicial body if they breach the national provisions. 

Small and medium-sized enterprises with up to 249 employees will be excluded from the requirements.