The European Union is currently working on a directive that will oblige Member States to lay down binding gender quotas of 40 % for supervisory boards or 33 % for management boards together. The current status of the consultation process is summarised below.
Procedure
The European Commission already started working on a proposal for a “Directive on improving the gender balance among non-executive directors of companies listed on stock exchanges” back in 2012. The aim of the proposal was to address the serious problems around the under-representation of women in key corporate positions. The legislative procedure ground to a halt in 2015 at the latest, however.
Ursula von der Leyen has now resurrected the project, putting it back on the agenda of the Council of the European Union. The intention seems to be to adopt the directive in second reading in the European Parliament, possibly before the end of the year.
However, it is doubtful whether such a target is realistic, as Slovakia, Poland, Sweden, Estonia, Latvia, Lithuania and Hungary have all expressed concerns.
What the directive covers
The aim of the directive is to increase the share of the under-represented sex (to date this has usually been women) in board positions. The planned directive will initially target only listed companies and will also not apply to companies with fewer than 250 employees and an annual turnover not exceeding EUR 50 million or an annual balance sheet total not exceeding EUR 43 million.
Since this is a directive, it will not apply directly, but merely serve as a basis for transposition into national law by the Member States. According to the current draft, Member States would be able to choose between two transposition options:
- Option 1: The Member State agrees to implement a target of at least 40 % of supervisory board and non-executive director positions being held by the under-represented sex.
- Option 2: The Member State agrees to implement a general target of 33 %. However, this target will apply not only to members of supervisory boards and non-executive directors but also to executive directors and management board members.
The planned quotas are however not supposed to result in more than half of the positions on smaller supervisory boards and management boards having to be held by members of one sex. Accordingly, the under-represented sex is to hold the number of board positions that comes closest to the target of 40 % or 33 %, but is less than 50 %. It would therefore still be the case that for a supervisory board with three members, only one position would need to be held by a member of the under-represented sex.
Member States may also provide that companies where the members of the under-represented sex make up less than 10 % of the workforce are generally exempt from the minimum quotas.
Finally, the proposal specifies that candidates have the right to be provided with the following information on request:
- 1. the qualification criteria upon which the selection was based,
- 2. the objective comparative assessment of those criteria and
- 3. the considerations tilting the balance in favour of a candidate of the other sex.
Implementation in Germany
According to the current draft, individual Member States may suspend implementation of the European quotas if they have already ensured a balanced representation of men and women through existing targets (“opt-out option”). The Federal Republic presumably already meets the requirements for such an opt-out based on its Second Act on Equal Participation of Men and Women in Management Positions (Zweites Fürhrungspositionen-Gesetz, “FüPoG II”) (see newsletter 4/21), which came into force on 12 August 2021. This means that, in its current version, the directive would not have to be implemented. It is however conceivable that the current coalition government will use the directive as an opportunity to raise existing quotas from 30 % to 40 %.
Conclusion
The directive still has to be negotiated with and adopted by the EU Parliament. Only then will it be clear what the final content of the directive will be. It is not currently possible to say whether it will actually get to that stage, however. If the directive were to be implemented, the quotas would – as things presently stand – have to be fulfilled by the companies concerned by 31 December 2027 in any case, unless the Federal government makes use of its opt-out option. Should the quota actually be increased to 40 %, many larger companies would once again be under pressure to take action. We will monitor developments and keep you informed.
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