EUROPEAN COMMISSION

Brussels, 18.10.2022

COM(2022) 534 final

2012/0299(COD)

COMMUNICATION FROM THE COMMISSION
TO THE EUROPEAN PARLIAMENT

pursuant to Article 294(6) of the Treaty on the Functioning of the European Union

concerning the

position of the Council on the adoption of a directive of the European Parliament and of the Council on improving the gender balance among directors of listed companies and related measures.

(Text with EEA relevance)

2012/0299 (COD)

COMMUNICATION FROM THE COMMISSION
TO THE EUROPEAN PARLIAMENT

pursuant to Article 294(6) of the Treaty on the Functioning of the European Union

concerning the

position of the Council on the adoption of a directive of the European Parliament and of the Council on improving the gender balance among directors of listed companies and related measures.

(Text with EEA relevance)

1.Background

2.Objective of the proposal from the Commission

The aim of the proposal for a directive is to improve gender-balanced representation on corporate boards of large listed companies. It sets up an objective of 40% non-executive directors of the under-represented sex and requires companies to introduce clear and unambiguous criteria for their selection procedures. The objective is to be attained by 30 June 2026. Member States may set a lower objective (33%) provided it would cover both executive and non-executive directors. Companies that are subject to the 40% target for non-executive directors would have to undertake individual commitments regarding the representation of both sexes among executive directors.

Whilst Member States will have to oblige listed companies to strive for an attainment of the quantitative targets, failure to achieve these targets would not result in sanctions. Rather, those companies that do not achieve the targets would need to establish a transparent selection process for board positions, which must be based on clear qualification criteria to be determined by the companies in advance of the selection process. In addition, they would need to explain the reasons and to include the description of measures taken and planned in order to meet the objectives or commitments in the future.

The transparent selection procedure will need to include a preference rule with the aim of meeting the objectives: in the presence of equally qualified candidates of both sexes, priority shall in principle be given to the candidate of the under-represented sex. This requirement is based on an objective assessment taking into account all the selection criteria applied to the individual candidates, in line with the case-law of the Court of Justice of the European Union concerning positive action.

Procedural measures are put in place to support candidates that would wish to challenge a selection procedure, such as a reversal of the burden of proof rule.

Member States will be obliged to put in place penalties applicable in case of breach of the obligations set out in the directive. These penalties will have to be effective, proportionate and dissuasive.

The Directive takes into account well-functioning national systems by allowing Member States to suspend the application of the procedural requirements where they have equally effective national measures in place.

3.Comments on the position of the Council

In line with the political agreement, the Council’s first reading position introduces a number of changes to the Commission’s proposal, mainly in order to:

·clarify the scope of the procedural obligations to reach gender balance – to ensure that all stages of the board members’ selection process are covered;

·clarify the scope of the directive through the definition of listed company, including by referring to the ‘registered office’; 

·delete the possibility to exempt companies with a workforce particularly dominated by one sex i.e. companies where the members of the under-represented sex make up less than 10% of the workforce;

·streamline the deadlines so that public and private undertakings are subjected to the same deadlines for achieving the targets;

·shorten the deadline by which the quantitative targets should be achieved by companies and set it at 30 June 2026;

·include in the directive the detailed conditions to allow Member States to suspend the procedural requirements if they have equally effective national measures in place; 

·strengthen the reporting and monitoring as part of the review clause: the Commission will not only report on whether the conditions to apply the suspension clause are and remain fulfilled, but it will also assess whether those Member States making use of that clause continue making progress towards a more balanced representation between women and men among non-executive director positions or all director positions in listed companies. If no further progress is made, the revision clause invites the Commission to consider a revision of the directive.

The Council’s position fully reflects the political agreement reached between the European Parliament and the Council on 7 June 2022. The Commission considers that these amendments to the proposed directive are in line with its original policy objectives. Therefore, the Commission can endorse the Council’s position.

4.Conclusion

The Commission supports the Council position.

The adoption of this Directive will mark an important milestone towards effective gender equality in the European Union.