On 14 November 2012, the European Commission announced that it is proposing to legislate to "break the glass ceiling" that prevents women from obtaining top positions in Europe's biggest companies. Under the new Directive, affected companies will be required to ensure that at least 40% of their non-executive directors are female. The new rules will apply only to companies:
- listed in Europe;
- with 250 or more employees; and
- with an annual worldwide turnover of more than €50 million.
The 40% target must be met by 2020, or 2018 in the case of state owned companies. The 40% requirement does not apply if:
- females comprise less than 10% of the workforce; or
- females hold at least one-third of all director positions, both executive and non-executive.
Companies which do not meet the 40% target will, when recruiting new non-executive directors, be required to compare the qualifications of each candidate, applying clear and gender-neutral standards. Where there is a male and a female candidate with equal qualifications, preference is to be given to the female candidate unless, based on an objective assessment, the balance is tilted in favour of the male candidate.
Listed companies will be required to set themselves a self-regulated target – a "flexi quota" – regarding the balance of male and female executive directors on boards by 1 January 2020.
EU Member States will be required to adopt the Directive into local law within two years of its adoption. Member States will be required to set sanctions for companies breaching the national provisions. However, it is proposed that the Directive will expire at the end of December 2028, by which time sustainable progress towards gender balance is expected to have been achieved.
Whilst many Member States, including France, Spain, the Netherlands, Italy and Belgium already have legislative measures dealing with gender representation on company boards, the UK has not favoured such an approach and has welcomed the Commission's decision not to impose mandatory quotas. In a recent report, the House of Lords made clear that they do not support a quota for women on boards and view quotas as a 'last resort' if voluntary-led approaches by businesses fail.