Introduction
Equality between women and men is one of the European Union's (EU) founding values. However, the share of women on corporate boards in the EU is 34% on average. While the representation of women in corporate boards has improved in most EU Member States, the extent of progress varies considerably. In some Member States it is stagnating.
Article 23 of the Charter of Fundamental Rights of the EU provides that equality between women and men is to be ensured in all areas and that the principle of equality cannot prevent the maintenance or adoption of measures providing for specific advantages in favour of the underrepresented sex. The European Pillar of Social Rights incorporates among its principles equality of treatment and opportunities between women and men, including regarding participation in the labour market, terms and conditions of employment and career progression.
EU law also permits the adoption of measures to ensure the application of the principle of equal opportunities and equal treatment of men and women in matters of employment. It permits positive action by allowing Member States to maintain or adopt measures providing for specific advantages to make it easier for women to pursue a vocational activity or to prevent or compensate for disadvantages in professional careers.
The scattered regulation or the absence of regulation at national level as regards the gender balance on boards of listed companies not only leads to discrepancies in the number of women directors and to different rates of improvement across EU Member States, but also poses barriers to the internal market by imposing various corporate governance requirements on listed companies through the EU.
Such differences in legal and self-regulatory requirements for the composition of boards can lead to practical complications for listed companies operating across borders. This is particularly obvious in establishing subsidiaries or in mergers and acquisitions, and for candidates for director positions.
The Gender Balance on Corporate Boards Directive
It is in that context that the EU enacted a Directive on improving the gender balance among directors of listed companies. The Directive is a welcome development for gender diversity. EU Directive 2022/2381 (the Gender Balance on Corporate Boards Directive or Directive) aims to achieve a more balanced representation of women and men among the directors of listed companies by establishing effective measures that strive to accelerate progress towards gender balance, while allowing listed companies sufficient time to make the necessary arrangements for that purpose.
The Directive sets targets under which Member States shall ensure that listed companies are subject to either of the following objectives, to be reached by 30 June 2026:
(a) women hold at least 40 % of non-executive director positions;
(b) women hold at least 33 % of all director positions, including both executive and non-executive directors.
The Directive does not apply to micro, small and medium-sized enterprises (SMEs).
In scope companies which do not achieve the foregoing targets must adjust the process for selecting candidates for appointment or election to director positions. Those candidates must be selected based on a comparative assessment of the qualifications of each candidate. Clear, neutrally formulated and unambiguous criteria must be established in advance of the selection process and applied in a non-discriminatory manner throughout the entire selection process. This includes during the preparation of vacancy notices, the pre-selection phase, the shortlisting phase and the establishment of selection pools of candidates.
When choosing candidates who are equally qualified in terms of suitability, competence and professional performance, priority must be given to women unless, in exceptional cases, reasons of greater legal weight can be invoked. Examples include the pursuit of other diversity policies, invoked within the context of an objective assessment which takes into account the specific situation of a candidate of the other sex and which is based on non-discriminatory criteria, which may tilt the balance in favour of the candidate of the other sex.
At the request of a candidate who was considered during selection of candidates for appointment or election to a director position, listed companies are obliged to inform that candidate of the following: (a) the qualification criteria upon which the selection was based; (b) the objective comparative assessment of the candidates under those criteria; and (c) where relevant, the specific considerations exceptionally tilting the balance in favour of a candidate who is not of the underrepresented sex.
Irish Implementation of the Gender Balance on Corporate Boards Directive
The deadline for the transposition by EU Member States of the Directive's rules into their national legislation was 28th December 2024. However, at the time of writing (February 2025), Ireland had not yet transposed the Directive into Irish law.
When it does so, Ireland must ensure the implementing legislation provides for:
- Specific binding measures for the selection procedure of board directors, with transparent and gender-neutral criteria.
- Preference rule for the candidate of the underrepresented sex - in case of equally qualified candidates of both sexes.
- The disclosure of qualification criteria if requested by an unsuccessful candidate.
- Individual commitments from listed companies to reach gender balance among executive directors.
- Reporting on the composition of boards and obstacles to meet the target of the Directive, where applicable, and actions taken to overcome these.
- Effective, proportionate, and dissuasive penalties for companies failing to comply with transparent selection and reporting obligations.
- Penalties, which can include fines and nullity or annulment of the contested directors' appointment if needed.
The Directive also requires Ireland and other EU Member States to publish a list of companies that reached the gender balance targets as well as to designate one or more bodies for the promotion, analysis, monitoring and support of gender balance on boards. Hopefully, the Irish Government will take prompt action to transpose the Directive into Irish law so that progress in gender equality can continue both in the board room and more broadly in society. Promoting gender balance on boards is also likely to have a positive impact in closing the gender pay gap.
For more information, please contact Gergana Moran or John Gaffney or your usual Beauchamps contact.