Last October, the Council of the EU adopted the Women on Boards directive, which is aimed at improving the gender imbalance among directors and those in senior roles in listed companies. The UK should take note despite Brexit, writes Fieldfisher’s head of employment, Ranjit Dhindsa
From 30 June 2026, large listed companies (those with over 250 employees) will have to ensure that 40% of non-executive director posts and 33% of senior roles (including directors, NEDs, CEOs and COOs) are held by women, as part of a new EU Women on Boards directive.
Companies will be required to provide information about the gender representation on their boards annually, and must be able to demonstrate the measures they are taking to achieve the quotas or an explanation for any failure to. A list of the companies meeting the directive’s targets will be published by the member states.
Non-EU and UK companies should be conscious of following the precedent set by the Directive, especially if they operate within Europe. This is particularly so for FTSE 350 companies”
Under the directive, preference will only be given to equally qualified women and safeguards must remain in place to ensure that merit remains the key criterion in any selection procedure, in order to avoid any automatic and unconscious promotion of women.
Member states are allowed to set their own penalties for non-compliance but the council has recommended that sanctions could include fines and the annulment of board appointments. Member states with existing gender quotas of equally effective measure will not be required to apply the directive so long as they are able to demonstrate their own laws are stringent enough to reach the mandated targets.
It is the company’s registered office that is relevant in determining whether the directive applies.
Despite its lack of applicability, non-EU and UK companies should be conscious of following the precedent set by the directive, especially if they operate within Europe. This is particularly so for FTSE 350 companies who under the FTSE Women Leaders Review have been set a similar (voluntary) target of 40% women on boards by 2025, and for the UK’s 50 largest private companies who have now been included within the review’s remit.
Gender diversity
UK’s largest companies urged to share leadership gender data
EU agrees on 40% quota for women on boards
Energy sector makes little progress on executive gender diversity
Women’s promotions at financial services firms lag behind
Government to back new five-year FTSE gender diversity review
Background
In September 2010, the European Commission adopted a gender equality strategy that included equality in senior positions. By March 2012, a report on Women in Economic Decision Making in the EU showed that limited progress had been made since 2010 to achieving gender balance within the boardrooms.
The European Commission made its first proposal regarding increased gender equality and women on boards on 14 November 2012 but the plans were initially blocked by larger member states, including the UK and Germany.
In the UK, mandatory quotas were opposed by the then Conservative-Liberal Democrat government, which preferred a voluntary self-regulation approach set out in the Davies Review.
Since the first proposal, the European Commission have reaffirmed its support for an increased participation of women in positions of responsibility and the Council acknowledged that gender equality policies are vital to economic growth through the European Pact for Gender Equality 2011-2020.
Out of the 27 member states, only Sweden, Poland, Estonia and Hungary voted against the directive adopted in October. At the time of adoption, only nine of the 27 member states had existing quota legislation in place.
Do gender quotas work?
Yes. Norway clearly demonstrates that gender quotas work. In 2007, Norway introduced its quota law, requiring a board make up of at least 40% women with results showing an increase in female board members from 6% in 2002 to 42% in 2016.
Critiques of gender quotas argue that other countries with no mandatory benchmarks have also shown significant gender equality growth. However, there is a large variance between the companies.
In the UK, 32% of boards were made up of women in 2021, with the top company having 50% female representation and the lowest having 8%. This variation is not seen in countries where there are mandated quotas backed by sanctions.
While women are doing better in non-executive director roles, the key decision making positions such as CEO and chair still remain the least populated by women”
There is also a disparity between countries who have mandatory laws and those with soft or no measures in place. A study examined gender equality in about 1,000 companies in Italy and Greece over the same period of time in which Italy adopted mandated gender quotas for corporate boards and Greece did not. The results showed that between 2011 and 2019, women’s representation in Italy grew from 5% to 36%, but in Greece it only grew from 6% to 9%.
Downsides to quotas
While women are doing better in non-executive director roles, the key decision making positions such as CEO and chair still remain the least populated by women. Only 12% of executive roles within FTSE 250 companies are currently held by women, despite them occupying 39% of executive and non-executive positions.
Research also suggests that quotas fail to address the underlying causes of discrimination and gender imbalance, for example, the mandated quotas in Norway resulted in women holding 40% of board seats but this did not trickle down to lower levels where underrepresentation and unequal pay persisted. The general attitude tends to be “let’s meet the quota in order to avoid any sanctions or bad publicity” but companies do not then try to reverse the historical under-representation of women by challenging their own internal processes at all levels.
The threat of sanction is also not always persuasive enough to ensure company compliance. In 2017, 37,000 German companies had to pay a levy for failing to reach the mandated disability quota.
As well as issues surrounding the overall and lasting effects of quotas, evidence suggests that women are perceived as less competent when selected by quotas in comparison to women selected based on merit, as it can lead to inferences that merit played no role in the selection process, often leaving some employees dubbed as “quota women”.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
While there is the need to set numerical goals for companies to work towards (because without, they will simply not try to achieve gender equality), the focus needs to shift to ensuring women are reaching the key decision-making roles and that under-representation is addressed at every level.
Latest HR job opportunities on Personnel Today
Browse more human resources jobs
