The directive is aimed to ensure that gender balance in corporate boards of listed companies is improved across the EU, while allowing for flexibility for Member States that have adopted equally effective measures. This flexibility allows for the suspension of the procedural requirements set out in the Directive.
Key provisions of the directive
At the heart of the new directive lies a transparent selection process of the board members based on clear criteria and a comparison of the candidates’ qualifications. Large listed EU companies that do not meet the target of 40 % among non-executive board members or 33% among all directors of the under-represented sex by 30 June 2026 have to ensure fair and transparent selection procedures for the selection of candidates for board positions. Such companies will be required to make appointments on the basis of a comparative analysis of the qualification of candidates by applying clear, gender-neutral and unambiguous criteria and to ensure that applicants are assessed objectively based on their individual merits, irrespective of gender.
This approach respects all candidates’ qualifications and merit as the decisive criteria. The criteria for board positions are to be established by the companies themselves. Suitability, competence and professional performance, not gender, remains the key factors for the selection process. Only when two candidates are equally qualified should the choice be made in favour of the underrepresented sex.
Large-listed EU companies also have to undertake individual commitments to reach gender balance among their executive board members.
Companies that fail to meet the objective of the directive must report the reasons and the measures they are taking to address this shortcoming.
Member States foresee penalties for companies that fail to comply with selection and reporting obligations. Such penalties must be effective, proportionate and dissuasive. They could include fines and nullity or annulment of the contested director’s appointment. Member States are required to publish information on companies that are reaching targets, which would serve as peer-pressure to complement enforcement.
Member States have to transpose the Directive into national law within two years – by 28 December 2024.