Gender diversity on the board of directors of listed

Spotlights - december 2012
Gender diversity on the board of directors of listed companies
– Commission proposes 40% objective
On 14 November 2012, the European Commission published a proposal for a Directive on improving the
gender balance among non-executive directors of companies listed on stock exchanges and related
measures. The proposed Directive sets an objective of a 40% presence of the under-represented sex among
non-executive directors of companies listed on a regulated market. The proposal does not apply to small and
medium-sized enterprises.
Background
Eleven Member States (including Belgium) have already introduced legal instruments to promote gender equality on
company boards. In eight of these countries (including Belgium), legislation covers public undertakings. Meanwhile, a
further eleven EU countries have neither self-regulation measures nor legislation in place. This legally fragmented approach
risks hampering the functioning of Europe's single market, according to the European Commission.
The Commission finds that gender equality is among the founding values and fundamental objectives of the EU, and it is
now responding to calls from the European Parliament (notably in its resolutions of 6 July 2011 and 13 March 2012).
Main elements of the European proposal
The proposed Directive sets a minimum objective of 40% by 1 January 2020 for members of the under-represented sex for
non-executive members of the boards of publicly listed companies incorporated in a Member State whose securities (the
term is not defined in the proposed Directive) are admitted to trading on a regulated market in one or more Member States.
The above-mentioned quota is also applicable for public undertakings by 1 January 2018. In order to achieve this objective,
the proposal requires these companies to adopt and implement pre-established, clear, unambiguous and neutrally
formulated criteria regarding the selection process for these posts. Priority should be given to the candidate of the
under-represented sex if that candidate is equally qualified as the candidate of the other sex.
In accordance with the subsidiarity and proportionality principles, the proposal does not apply to either small or
medium-sized listed enterprises, which are "companies which employ less than 250 persons and have an annual turnover
not exceeding EUR 50 million or an annual balance sheet total not exceeding EUR 43 million", nor does it apply to
non-listed enterprises.
The 40% objective is focused on non-executive director posts. For executive director posts, the companies concerned must
set self-regulatory targets regarding the representation of both sexes to be met by 2020 (or 2018 in the case of public
undertakings). Companies will have to report annually.
Member States remain free to introduce measures that go beyond the proposed system (minimum harmonisation).
Finally, Member States will have to lay down appropriate and dissuasive sanctions for companies in breach of the rule,
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which, in line with better regulation principles, is a temporary measure and should expire on 31 December 2028.
Impact in Belgium
The Act of 28 July 2011 added Article 518bis to the Belgian Companies Code (see Eubelius Spotlights June 2011). This
article states that at least one-third of the members of the board of directors of companies whose shares are traded on a
regulated market must to be of a different sex from that the other members. This should be achieved by 2017 for listed
companies and by 2019 for small and medium-sized listed companies. The same objective is to be achieved by 2012 for
public undertakings.
Belgium is one of the “good students” as, on the one hand, Belgian law also applies to small and medium-sized listed
companies (which do not fall within the scope of the proposed Directive) and, on the other hand, the Belgian objectives
have to be achieved earlier than the European deadlines. The 33% quota will not have to be revised upwards, as the
proposed Directive states that "Member States may provide that the objective ... is met where listed companies can show
that members of the under-represented sex hold at least one third of all director positions, irrespective of whether they are
executive or non-executive". The percentage provided by the Act of 28 July 2011 refers to the "members of the board of
directors" without distinction.
Florence Andrianne
Jean-Marc Gollier
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