Members of European Parliament this week backed a European Commission proposal for gender quotas on company boards.

The commission's proposal calls on listed companies to ensure that at least 40 percent of their non-executive board members are women by 2018 or 2020. The earlier deadline would apply to listed companies owned in whole or part by member states. The measure was endorsed by European Parliament's Committees on Legal Affairs and Women's Rights & Gender Equality.

Under the plan, where candidates are equally well qualified, preference should go to the candidate of the under-represented sex.

MEP Rodi Kratsa-Tsagaropoulou of Greece said the votes signaled an important call for legislation to increase women's participation in boards of listed companies. “What is currently a reality in some EU member states will soon be extended to the single market as a whole and all EU listed companies, thereby making the most of the talents of many qualified and highly skilled women,” Kratsa-Tsagaropoulou said in a statement.

Rapporteur Evelyn Regner of Austria said now they will await action by the council, and the two bodies will hammer out the details of the proposal.

“It is important that the directive should be broad in scope and that many listed companies are required to use the open and transparent procedure when selecting their non-executive directors,” Regner said in a statement. “We do not have an exemption for family enterprises or specific sectors, but we have strengthened the penalties that member states should apply when companies do not fulfill the directive's requirements.”

Companies falling short of the benchmark would be required to explain their actions taken to national authorities and how they plan to reach the goal. The MEPs said fines and other penalties should be imposed when companies fail to follow “transparent and open appointment procedures” rather than for falling below the goal. MEPs went beyond the commission by calling for certain penalties to be mandatory, including the exclusion of companies from public tender offers.

Initially, Regner and Kratsa-Tsagaropoulou had recommended small and medium sized enterprises be included in the directive. However, the committees voted to provide an exemption for small and medium sized enterprises are exempt from the proposal.  Instead, member states are encouraged to provide incentives for those companies to follow suit. Companies in sectors in which women make up less than 10 percent of the workforce will have to comply with the regulation, after talk of exempting those companies as well.

Several EU nations already have gender-equality quotas in place, including Belgium, Italy, the Netherlands, Spain, and France. The European Commission also released this week a new report concerning women's representation in large publicly listed companies in the EU. The latest figures show women account for 17.6 percent of non-executive directors, up from 16.7 percent in 2012. The progress, however, varies from country to country. (See chart below.)

“Regulatory pressure works. The cracks are starting to show in the glass ceiling,” EU Justice Commissioner and Vice President Viviane Reding said in a statement. “More and more companies are competing to attract the best female talent. They know that if they want to remain competitive in a globalized economy, they cannot afford to ignore the skills and talent of women.”

The proposal is expected to be voted on during parliament's plenary session next month.

Topics