EU Parliament passes directive on gender quotas for corporate boards

The European Parliament gave its final approval on Tuesday (22 November) to a law that will implement quotas to boost gender balance on corporate boards across the bloc.

The Women on Boards Directive, first proposed by the European Commission ten years ago, focuses on publicly traded companies. It implements quotas on the proportion of board seats filled by the “underrepresented sex” — 40% for only non-executive seats or 33%  for both non-executive and executive board positions.

Social Democrat co-rapporteur Evelyn Regner and other proponents of the directive argue that increased diversity within high-ranking corporate positions will also help the European economic recovery process.

“It is economically difficult at the moment because of the pandemic, because of inflation, because of the climate crisis, because of the war in Ukraine; that’s exactly why we need strong companies in Europe,” Regner told a plenary session in Strasbourg.

“And we can only have strong companies if women are on boards and are leading the way. We need to use all of their expertise,” she added.

Helena Dalli, the EU Commissioner for equality, reiterated this sentiment, saying that “evidence shows that a broad range of talents and skills and an inclusive and diverse approach in the board room contribute to better decisions in corporate governance, increase public trust in business, and drive economic growth.”

Co-rapporteur Lara Wolters, also with the S&D group, added that this decision will impact future generations in addition to women already in the workforce.

“Today is a victory for girls who, as we very well know, cannot be who they cannot see,” she said.

Criticism

However, many in and outside of the Parliament disagree with this regulatory approach. Several countries, including Sweden, Slovakia, Hungary, and Estonia, argue that the issue of gender balance on company boards is a matter for national governments to address rather than the EU.

In response to this, Commissioner Dalli said that based on recent data, “progress made by voluntary initiatives was much slower and less sustainable.”

“When self-regulation does not bring the desired effect, EU regulatory action is necessary,” she added.

Another criticism is that the use of quotas could lead companies to appoint women to board seats based on gender rather than merit, to which Wolters countered: “I think it’s time we leave that argument where it belongs, in the previous century.”

“We’ve tried asking nicely. We’ve tried waiting for the old boys’ networks to die out, and to no avail. Quotas are a blunt instrument, yes, but where there’s a lack of will, you need a law,” she added.

Sanctions

According to the new rules, member states will also be required to set up a penalty system for companies that fail to meet the new standards by 2026.

Member states themselves will also face punitive measures for failing to implement policies to achieve the directive’s goals.

“I think it’s no secret that there are some member states that are more keen on this than others,” Wolters told EURACTIV. “And the beauty is that we’ve got a number of sanctions or measures in this that we can take if they do drag their feet.”

Other kinds of diversity

Lawmakers from both sides of the political spectrum also questioned the merit of focusing on gender alone rather than on other characteristics, such as ethnicity.

Greens MEP Pierrette Herzberger-Fofana argued that ethnicity and other factors should also be included in the directive to improve diversity in multiple respects.

“This diversity would include qualified women regardless of their cultural origin, their sexual orientation, their age, or their religious belief,” she said. “In the long-term, we want to see that there be parity for all posts. […] That would be the bedrock of a rainbow society that is participatory and also inclusive.”

Meanwhile, Margarita de la Pisa Carrión of the conservative ECR group argued that this directive will set the EU on a slippery slope towards implementing other kinds of quotas.

“It’s the thin end of the wedge. Now we are talking about sex; why not gender? Or could it also be race or ethnic origin? This is a lack of respect — if we only focus on people’s characteristics, not on the people… we should be looking at their experience, their capacities,” she said.

Wolters responded that having diversity on boards “in different ways” was a priority.

“Do we achieve that by having [policies focused on just] women and men? No, I think we also need to look at other things. But can we do that here today? No, we can’t,” she said, also conceding that this policy will only address one of many challenges that women face.

She highlighted childcare and paternity leave as other challenges that needed policy solutions, while Left MEP Manon Aubry added raising the minimum wage and combating domestic and sexual violence.

[Edited by Zoran Radosavljevic]

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