When the then EU Justice Commissioner Viviane Reding first proposed exchange-listed European companies should be required to have gender-balanced boards, Lara Wolters was just an intern in Brussels.
Now the Dutch member of the European Parliament had the privilege of announcing a decade-long struggle requiring more women to sit on corporate boards had finally succeeded after member states dropped their objections.
“I don’t know if that makes me a young MEP or if that makes this an old directive, but I think we can all agree that, either way, 10 years is a rather long time,” Wolters told reporters on Wednesday.
Calling it a “landmark moment” for the bloc, the legislation’s co-rapporteur in the European Parliament argued it would create a new culture starting at the top that would work its way through all levels of management.
“I never thought as a socialist I would use the term, but it’s also about a trickle-down effect of those board members,” Wolters said. “I think there’s a deep realization within the different member states that business as usual…doesn’t work, and the result of that was seen last night.”
The previous evening, the European Council that represents the individual interests of the 27 constituent governments agreed to Brussels imposing an EU-wide decision stating that 40% of a company’s nonexecutive directors in the future will have to be women.
It doesn’t stop there, either.
When including the management boards responsible for running the day-to-day operations of a company, a common fixture of Europe’s two-tier corporate governance structure, the combined number will have to be at least 33%.
According to the European Parliament’s Austrian vice president Evelyn Regner, currently, just 30.6% of nonexecutive board directors are women, while 8.5% of management boards are women.
“Since 2003, only an average increase of 0.6% per year in the number of women on boards has been recorded, so it means there’s a lot to go, when we look at the situation nationally, only there where there are binding measures do we have really have success,” said Regner. “This has to change.”
Regner hailed the result as proof that patience, persistence, and creativity paid off in the end, and thanked France, the current holder of the rotating six-month Council presidency, for helping to push the legislation through at a member state level.
Since the decision is a softer “EU directive” rather than the more strict corset of a “regulation” from Brussels, it’s entirely at the discretion of the member states themselves how they aim to legally fulfill their obligations under the new law.
But Regner argued they would be required to include sanctions in their respective legislation to ensure there was an effective deterrent.
“The directive needs teeth, and that’s what we also put into it: penalties, in order to really have an efficient instrument,” she said on Wednesday.
Norway led
The founder and CEO of the Oslo-based FutureBoards, credited current EU Commission President Ursula von der Leyen, elected in 2019, with pushing the proposal forward. Turid Solvang recalled when Norway was the first country worldwide to legislate a gender-equality component into its Companies Act.
“No action was initially taken, as if directors didn’t believe it would actually come. Once the quota went into effect, however, the transition…was virtually seamless,” she told Coins2Day. Fears companies might delist as a result proved untrue.
After EU countries long fought Brussels’ regulatory interference on the issue, Solvang suspects attitudes changed thanks in part to the pandemic.
It helped serve as a catalyst as governance had to immediately respond and adapt to the enormous challenges COVID posed.
“If you only put on the boards the same people coming from the same schools and sharing the same background, you won’t get the diverse perspective stakeholders have now come to expect,” she said. “Women make up half the population and university graduates, so there’s no logical reason that should not also be the case on corporate boards.”
A visibly happy Reding was quick to share her relief over the fruition of her proposal. Posting to Twitter, she shared a picture of her celebrating on Wednesday with von der Leyen, the first woman to ever lead the EU’s executive.