On 7 December 2022, the Official Journal of the EU published  of the European Parliament and of the Council of 23 November 2022 on improving the gender balance among directors of listed companies and related measures.

Who is impacted by the "Women on boards" Directive?

The Directive applies to "listed companies": companies having their registered office in an EU Member State and whose shares are admitted to trading on an EU regulated market. Micro, small and medium-sized enterprises are excluded from the scope of the Directive.

Which Member State is competent and which national rules shall apply?

The Member State competent to regulate matters covered by this Directive shall be the Member State in which that listed company has its registered office. The applicable law shall be the law of that Member State.

What is changing?

Following transposition into the national law, listed companies will need to comply with a number of new requirements with respect to the composition of their boards and the related selection process.

Quota:

Listed companies must comply with either of the following objectives by 30 June 2026:

– members of the underrepresented sex to hold at least 40 % of non-executive director positions;

- members of the underrepresented sex to hold at least 33 % of all director positions, including both executive and non-executive directors (unless individual quantitative objectives are set).

Selection process:

Listed companies which do not achieve these objectives shall adjust the process for selecting candidates for appointment or election to director positions. For that purpose,

– selection’s criteria must be clear, neutrally formulated and unambiguous and shall be applied in a non-discriminatory manner throughout the entire selection process;

- between candidates who are equally qualified in terms of suitability, competence and professional performance, priority is given to the candidate of the underrepresented sex unless, in exceptional cases, reasons of greater legal weight exist;

- listed companies are obliged to inform the candidate (upon request) of the following:

                        – the qualification criteria upon which the selection was based;

                        – the objective comparative assessment of the candidates under those criteria;

                        – and where relevant, the specific considerations exceptionally tilting the balance in favour of a candidate who is not of the underrepresented sex.

Reporting: 

Listed companies shall provide information to the competent authorities, once a year, about:

- the gender representation on their boards, distinguishing between executive and non-executive directors and regarding and the measures taken with a view to achieving the applicable objectives;

- where a listed company has not achieved one of the objectives, the reasons and a description of the measures which the listed company has already taken or intends to take in order to achieve them.

Next steps?

Although the Directive is only required to be transposed into the national law of Member States by 28 December 2024, listed companies are recommended to already take steps to inform their decision makers of the future requirements and to start adjusting their selection processes.

Nuala Doyle, Partner in the Banking and Finance and Capital Markets department at BSP

Claire Jordan-Dandrau, Associate in the Knowledge Management department at BSP