The European Commission is drafting a proposal that would see Europe’s listed companies ensure that they reserve at least 40 per cent of non-executive director board seats for women by 2020 or face fines and other sanctions. Naeema Choudry, partner in the Employment Group at international law firm Eversheds, comments:

“Today’s announcement that Europe’s listed companies will be forced to reserve at least 40 per cent of their non-executive director board seats for women by 2020 or face fines and other sanctions under a proposal being drafted by the European Commission will be disappointing for the UK Government, which had hoped to stave off pressure from the European Parliament to introduce EU-wide laws setting binding quotas for women on company boards.

“Back in March the EU Parliament urged European Commissioners to introduce new laws in this area. Although patience did seem to be wearing thin in Brussels, a recent announcement by the UK Government revealed that the number of women appointed to the boards of the UK’s top companies had reached unprecedented levels, with women now making up 16.7% of FTSE 100, and 10.9% of FTSE 250 boards, up from 12.5% and 7.8% respectively in 2010. The UK Government may have hoped that those figures would demonstrate that UK companies are taking the issue of gender diversity on boards seriously and sufficient progress is being made to avoid having new legislation imposed on it. FTSE companies are clearly moving in the right direction through voluntary means. Indeed, a study by Cranfield School of Management which was published earlier this year indicated that if this level of appointment continued, a target of 30 per cent female directors was achievable within four years.

“This shows that a business led approach is more likely to be sustainable in the longer term as companies see the commercial benefits of having a balanced board. It is hoped that this will then lead to greater gender diversity at senior levels below the board.”