Equbusiness book VERSION 28SEPT2023 - Flipbook - Page 91
In the pursuit of fostering a gender-neutral and diverse boardroom, the EU employs a similar approach in its
regulatory framework. For example, Article 5 of the directive mandates that member states ensure all listed
companies adhere to a gender balance quota. The quota system comprises two components: a 40% quota for
non-executive director positions, requiring each gender to be represented at 40% of the total non-executive
directorships, and a broader quota necessitating that members of the underrepresented gender hold 33% of all
directorships, encompassing both executive and non-executive roles. Listed companies failing to meet the gender
balance criteria under the broader quota must establish specific and measurable targets to rectify the imbalance.
The directive stipulates that companies should achieve the specified ratio by June 30, 2026. In essence, all listed
companies within EU member states are mandated to maintain a boardroom composition with a minimum of
33% representation for each gender.
While the Women on Board Directive refrains from specifying particular sanctions or penalties, it empowers
member states to undertake all necessary measures, such as implementing penalties or supplementary
measures, to ensure the effective establishment of gender-diverse corporate boardrooms. Member states are
obligated to ascertain that the processes and penalties for cultivating gender diversity within corporate boards
are both equitable and efficacious (Directive 8/1). These penalties must serve the dual purpose of dissuading
companies from favoring an overrepresented gender while also incentivizing the establishment of gender-diverse
corporate boards, thereby promoting a more inclusive and balanced corporate governance landscape.
In addition to penalties, member states reserve the right to declare elections or selections that deviate from the
directive's regulations as null or void. The compilation of penalties and supplementary measures is a mandatory
requirement, and member states are required to notify the European Union of these provisions by December 28,
2024.
7.4.2. A DIFFERENT APPROACH
7.4.2.1. EU
7.4.2.1.1. TRANSPARENCY IN BOARD ELECTION/SELECTION
In addition to defining scope and quotas, the directive stipulates the establishment of a transparent process for
selecting candidates for director positions from the member states (Directive Art. 6/1). This transparent process
aims to ensure fairness and non-discrimination, fostering gender diversity in corporate boardrooms. By creating a
gender-diverse pool of candidates, the directive facilitates a natural promotion of diversity within corporate
boards.
Moreover, the directive introduces a provision addressing situations where candidates possess equal
qualifications. In such cases, member states should prioritize the underrepresented gender unless other legal
reasons dictate otherwise. This provision aims to address gender imbalances in board representation.
To ensure transparency in the selection or election of board members, companies are mandated to inform
candidates of the qualification criteria guiding the selection process. Additionally, the evaluation process must be
fair and impartial, involving a comparison of candidates based on specified criteria (Directive Art. 6/3b). The
legislator acknowledges that under certain circumstances, specific considerations may be employed to favor a
candidate who is not of the underrepresented gender.
While not prescribing a specific sanction for non-compliance, the EU emphasizes the importance of member
countries establishing a national judicial system to enforce the rules and prevent discrimination in the selection
or election of board members. According to Directive Art. 6/4, an unsuccessful candidate of the
