European Parliament brings board-gender equality rules closer to fruition

The European Parliament has approved draft rules to ensure at least 40% of non-executive board members at EU-listed companies are women by 2020.

As part of Brussels’ plan to promote gender equality in economic decision-making, the Parliament backed a Commission proposal to ensure gender balance on boards for publicly listed companies, pointing out that, in 2012, only 15% of non-executive board members at the EU’s largest companies were women.

As part of the agreement voted yesterday, MEPs established that listed companies will have until 2020 to reach the target, while public ones should do so by 2018.

In adopting the new measures, backed by the Women’s Rights and Gender Equality and Legal Affairs committees, Parliament stressed that the rules would not apply to small and medium-sized enterprises.

However, MEPs encouraged member states to support SMEs and incentivise them to improve gender balance on their boards, too.

MEPs also proposed that the rules apply to companies where women comprise less than 10% of the workforce.

Parliament called for a transparent, open and meritocratic recruitment procedure in which gender balance was borne in mind throughout.

“Where candidates are equally well qualified, priority should go to the candidate of under-represented sex, at every stage of this procedure,” it said. “Qualifications and merit must remain the key criteria.”

Parliament added that companies failing to comply with the new rules would be required to justify themselves to the competent national authorities in their respective member states and describe the measures taken and planned to achieve them in future.

Penalties, such as fines, might be imposed for failing to follow transparent and open appointment procedures, rather than for failing to achieve the target, Parliament said.

“Where candidates are equally well qualified, priority should go to the candidate of under-represented sex, at every stage of this procedure.”

MEPs also proposed that “exclusion from public calls for tenders” should be added to the list of possible penalties, which they say should be mandatory, rather than indicative, as the Commission proposes.

Rapporteur Evelyn Regner said: “It is important the directive be broad in scope and that many listed companies be required to use the open and transparent procedure when selecting their non-executive directors.

“We do not have an exemption for family enterprises or specific sectors, but we have strengthened the penalties member states should apply when companies do not fulfil the directive’s requirements.”

A similar position on the draft rules will now have to be reached by the EU Council before negotiations between the Parliament and the Council can start.