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EU's New Plan Puts More Women in Corporate Boardrooms

December 04, 2012 09:03pm  
EU's New Plan Puts More Women in Corporate Boardrooms


After weeks of debate and revisions, the European Commission has released a draft law that is intended to elevate more women into boardroom positions throughout the European Union.  If the new law is passed by the European Parliament and the Council of the European Union, all corporations with more than 250 total employees should aim for a target of having at least 40 percent female representation on their executive and non-executive boardroom positions.

Companies that do not meet the target will not be penalized—at least, not right away.  Instead, they will have to submit plans for getting more women represented on their corporate boards. 

Until companies have met the 40 percent “flexi-quota,” their hiring policies will be required to change.  Under the new law, hiring managers must hire a woman over an identically qualified man until at least 40 percent of corporate board seats are occupied by women.  Companies are required to create sets of criteria for being on their executive boards that are clear and gender neutral.  When a female candidate is equally prepared for the position according to these criteria, she will be given the position over equally qualified men.

However, this law doesn't take effect right away.  Private companies, like those listed on EU stock exchanges, will have until 2020 to meet the “flexi-quotas.”  Public companies must meet the same goals by 2018.

The proposal was watered down from a strict 40 percent quota after opponents claimed that enough qualified female candidates would be difficult to find.  Under the original proposal for the draft law, any company that was found to be in violation of the quotas would be subjected to sanctions from the entire European Union.  Currently, less than 15 percent of corporate board members in the European Union are women.

The new version of the law makes it easier for companies to reach targets and allows for companies to have more men on their boards if they cannot find any qualified female candidates.  If passed, the law would also allow EU member states to submit alternative proposals for reaching a level of at least 40 percent women in corporate boardrooms in the same timespan.  If the member nation's proposal is found to be at least as effective as the commission proposal, the plan will be approved and the member state may make its own nationwide policy.

The draft law is likely to face extreme opposition from several different nations which oppose any type of quota system, even the more flexible quotas proposed by the European Commission.  Germany in particular tends to dislike the quota system. 

The proposal may also face some opposition from the EU member nations that have the lowest percentage of women in their corporate boardrooms already.  For example, Malta and Cyprus both have less than 5 percent female representation in their corporate boards.  These nations may have a significantly harder time arriving at the flexible quota numbers than a country like Finland, which already has over 25 percent women on its boards.

Sources: Financial Times, The Wall Street Journal


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