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The European Commission’s Directive on Women on Boards

[Brussels 2 August, 2013] The issue of gender quotas in Europe’s companies is, during the recent years, a highly politicised issue of heated debate. Since for the last years very small progress has been made regarding the representation of women on boards, the Commission made a proposal (14/11/2012) to create a legal basis to enhance the representation of women. The proposal was presented jointly by Vice-President Viviane Reding (Justice, Fundamental Rights and Citizenship), Vice-President Antonio Tajani (Industry and Entrepreneurship), Vice-President Joaquín Almunia (Competition), Vice-President Olli Rehn (Economic and Monetary Affairs), Commissioner Michel Barnier (Internal Market and Services) and Commissioner László Andor (Employment and Social Affairs), and is asking for at least 40% of women in corporate boards of the European Union’s (EU) member states (MS) until 2020.

What does the proposal say?

“The proposed Directive sets an objective of a 40% presence of the under-represented sex among non-executive directors of companies listed on stock exchanges. Companies which have a lower share (less than 40%) of the under-represented sex among the non-executive directors will be required to make appointments to those positions on the basis of a comparative analysis of the qualifications of each candidate, by applying clear, gender-neutral and unambiguous criteria.
Given equal qualification, priority shall be given to the under-represented sex. The objective of attaining at least 40% membership of the under-represented sex for the non-executive positions should thus be met by 2020 while public undertakings – over which public authorities exercise a dominant influence – will have two years less, until 2018. The proposal is expected to apply to around 5 000 listed companies in the EU. It does not apply to small and medium-sized enterprises (companies with less than 250 employees and an annual worldwide turnover not exceeding 50 million EUR) or non-listed companies”. In order to put the proposal into context, we have to take into consideration that the aforementioned companies do not represent even 1% of the female workforce in the EU, even if 60% of academics are women.

Opposing states

Even if we are still far from the actual adoption of the directive, some countries have actively criticized it and decided to send a letter to the European Commission, stating that they are planning to vote against the Directive, forming, thus, a blocking minority. Germany, the United Kingdom, the Netherlands and the Czech Republic are some of these countries that constitute this blocking minority opposing legislation that is talking about non-executive board members, not even about executive ones, who are the ones actually taking decisions. Women, as non-executive board members, would be again excluded from decision-making positions.

The EWL position and the demands for equal representation of women and men on boards in the EU

The EWL believes that the Directive is not reaching its true potential and that now is the time to actively and decisively push for gender equality.

To begin with, when talking about gender balance we are turning the focus away from what is important: equality. The debate should emphasize on equal representation rather than a better gender balance. The equal representation of women and men on corporate boards is a principle of democracy and human rights and many studies show that it contributes to growth and better decision-making, therefore, the objective of the directive should be to ensure parity/true equal representation among both executive and non-executive/supervisory board members .

On the same page, this equal representation should not be limited to large enterprises. On the contrary, the Directive should include companies with more than 50 employees. In order to take into account the constraint of companies and to allow for the introduction of accompanying measures, the directive should allow for gradual implementation referring small and medium sized enterprises as is the case in Belgium. The interesting aspect of the Belgian law is that the transition period is adjusted to the needs of different types of companies.

Moreover, further comprehensive measures should be adopted that would be leading examples of good practices. Some possibilities include:

Training of both women and men, mentoring and sponsor programmes, awards and prizes, databases of women interested to sit on boards, and so on.

Finally, the EWL pledges for stronger sanctions since, as evidence suggests, mandatory parity measures are generally more fruitful if there are penalties for non-compliance. An indicative example of this, while by no means the only one, is represented by France. France, which adopted a legal quota with adequate sanctions (e.g. fines) in January 2011, saw the most notable Improvement among the EU MS. France’s quota is 40 % by 2017 with an inter-mediate target of 20 % by 2014. In fact, the proportion of women on the boards of French companies had increased by 10 percentage points to 22,3 % in January 2012, up from 12,3 % in October 2010. This change was due to the binding quota with penalties for non-compliance.

History has proven that without decisive and focused measures, gender equality cannot be accomplished. In order to achieve a more legitimate and truly representative democracy in the EU we have to move from words to actions. The institutions of the EU and the MS have the opportunity and the obligation to make parity a reality.

The opposing countries have to legitimize themselves and explain to their constituencies why they are blocking the forthcoming of half of the population in each respective MS. Therefore, we ask the opposing countries to defend gender equality in the upper echelon of decision-making and to follow their peers’ example, Belgium, France, Italy, the Netherlands and Spain, MS that have legislation promoting gender equality in corporate boards.

At which stage of the process are we?

The proposal is now at the European Parliament (EP), since the beginning of 2013. The procedure involves five different parliamentary committees, namely: Internal Market and Consumer Affairs (IMCO), Economic Affairs (ECON) and Employment and Social Affairs (EMPL), Women’s Rights and Gender Equality (FEMM) and Legal Affairs (JURI).

The involvement of the EP actually made the proposal even stronger since, for instance, the targeted companies were enlarged to include large public undertakings that are not listed. So far, there is no reason to believe that this lengthy and complicated procedure will result to a more mediocre outcome. The proposal is anticipated in the plenary to go to vote on November the latest.

After the EP, the Council of Ministers is involved, a step that is thought as one of the most complicated ones since ministers from all MS have to debate on an issue whose approach differs drastically from one to another (e.g. France is largely in favor of such a Directive, while the Netherlands against). The fact that qualified majority voting and not unanimity is required in this case is expected to make the matter a little easier.

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