Council approves EU Directive to improve gender balance on company boards - Update

8 December 2022 2 min read

At a glance

Update: The EU Directive, which requires companies listed in one or more EU member states to ensure at least 40% of non-executive director positions are held by the underrepresented sex, was adopted by the European Parliament on 22 November 2022.
Member States have two years following the entry in force to adopt necessary national measures.

On 17 October 2022, the European Council gave their final approval to an EU Directive which aims to promote a balanced gender representation on the boards of listed companies.

The Directive lays down that at least 40% of non-executive director positions in listed companies must be held by members of the underrepresented sex by 2026. Where companies decide to apply the rules to both non-executive and executive directors, the target will be 33% of all director positions by 2026.

If companies fail to achieve the objectives, they will be required to adjust their selection process to include a fair and transparent selection and appointment procedure, comparing candidates on neutral criteria. Where candidates are equally qualified, priority should be given to those from the underrepresented sex. Once a year companies will be required to provide information about the gender representation on their boards and the measures being taken to achieve the 33% or 40% objective. A list of the companies that have achieved the directive’s objectives will be published annually.

If a country already has in place legislation which is equally as effective or has come close to achieving the objectives, they may suspend the Directive’s requirements.

Following the Council’s approval, the European Parliament must now formally adopt the final Directive text. This is expected to happen in late November 2022 after which the Directive will enter into force 20 days after publication in the Official Journal.