Adoption of the Women on Boards Directive

Following an initial proposal on gender balance on company boards submitted by the European Commission ten years ago and numerous positions by EU institutions setting gender equality as a priority within the Union expressed since then, Directive 2022/2381 on improving the gender balance among directors of listed companies and related measures was adopted on 23 November 2022 ("Directive").

Scope & objective

The Directive will not apply to micro, small and medium-sized enterprises (SMEs) but only to listed companies considering their particular economic importance, visibility and impact on the market. Through the increased representation of women among the directors of listed companies, the Directive aims to improve gender balance in their decision-making process while allowing listed companies sufficient time to make the necessary arrangements. It also lays down minimum procedural requirements regarding the selection of candidates for appointment or election to director positions.

Key provisions

Member States will have to ensure that listed companies are subject to either of the following objectives, to be reached by 30 June 2026: individuals of the underrepresented sex holding either (a) 40% of non-executive director positions, or (b) 33% of all director positions, including both executive and non-executive directors. When listed companies are only subject to the first requirement, they will have to set objectives to improve the gender balance among executive directors as well by 30 June 2026.

Listed companies failing to meet these requirements will have to adjust their selection process when appointing or electing a director. The selection will have to be based on clear, neutral and unambiguous criteria applied in a non-discriminatory manner throughout the entire process and candidates will have to be selected on the basis of a comparative assessment of their qualifications. When two candidates are equally qualified in terms of suitability, competence and performance, preference should be given to the candidate of the underrepresented sex unless, for greater legal reasons, the other candidate is preferred. In this regard, the Directive contains an exception clause: such obligations can be suspended by the Member State if, by 27 December 2022, all its listed companies have nearly achieved the quotas and if its laws already contain equally effective provisions.

Listed companies will be subject to yearly reporting obligations regarding the representation of their boards and Member States will have to publish a list of the listed companies which have achieved the gender balance requirement on their board. Effective, proportional and dissuasive penalties will have to be applied to listed companies breaching the obligations deriving from the Directive.

Transposition and entry into force

The Directive will enter into force on 27 December 2022 and expire on 31 December 2038, a date before which the Commission will have to assess whether there is a need to extend its duration. Member States will have to adopt the necessary laws and regulations to comply with the Directive by 28 December 2024.