After a ten-year fight, the EU ultimately agrees that women must hold at least 40% of board seats by July 2026.
Lara Wolters was an
intern in Brussels when then-EU Justice Commissioner Viviane Reding recommended
that exchange-listed European corporations be forced to have gender-balanced
boards.
After member states
dropped their objections, the Dutch member of the European Parliament had the
honor of declaring that a decade-long effort to require more women to
participate on corporate boards had succeeded.
"I'm not sure if
that makes me a new MEP or if it makes this an old directive, but I think we
can all agree that 10 years is a long period in either case," Wolters told
reporters on Wednesday.
The legislation's
co-rapporteur in the European Parliament said that it would create a new
culture that would start at the top and work its way down through all levels of
management, calling it a "landmark moment" for the bloc.
"I never imagined
I'd use the term as a socialist," Wolters added, "but it's also about
a trickle-down effect of those board members." "I believe there is a
fundamental recognition among the various member states that business as
usual...doesn't work, as evidenced by last night's events."
The European Council,
which represents the specific interests of the 27 constituent nations, agreed
the previous evening to Brussels enforcing an EU-wide decision requiring 40 percent of a company's non-executive directors to be women in the future.
It also doesn't end
there.
When you add in the
management boards in charge of operating a company's day-to-day operations,
which is a prevalent feature of Europe's two-tier corporate governance
structure, the total number has to be at least 33%.
According to Evelyn
Regner, the Austrian vice president of the European Parliament, women make up
only 30.6 percent of non-executive board directors and 8.5 percent of
management boards.
"Since 2003, there
has only been an average growth of 0.6 percent each year in the number of
women on boards, so there's a long way to go," Regner said. "When we
look at the situation nationally, only where there are binding measures do, we
have really had success," she added. "Something has to be done."
Regner praised the
outcome as proof that perseverance, innovation, and patience paid off in the
end, and commended France, which now has the rotating six-month president of
the Council, for assisting in the passage of the legislation at the member
state level.
Because the decision is a
milder "EU directive" rather than a more stringent
"regulation" from Brussels, it is fully up to the member states to
determine how they want to legally fulfill their commitments under the new law.
Regner, on the other
hand, contended that they would be forced to incorporate fines in their legislation
to ensure an effective deterrent.
The directive needs
teeth, and that's what we included in it as well: consequences," she
remarked on Wednesday.
Norway led.
FutureBoards' creator and
CEO, Ursula von der Leyen, praised current EU Commission President Ursula von
der Leyen, who was elected in 2019, for advancing the plan. Turid Solvang
recounted how Norway was the first country in the world to enshrine gender equality
in its Companies Act.
"At first, no action
was taken, as though the directors didn't believe it would happen." The
transition, however, was "essentially painless" once the quota was
implemented, she told Fortune. Fears that corporations might delist as a result
were unfounded.
After years of fighting
Brussels' regulatory meddling on the topic, Solvang believes attitudes have
shifted as a result of the pandemic.
It acted as a motivator
since the government had to respond and adapt quickly to the significant issues
COVID posed.
"You won't get the
diversified perspective stakeholders have come to anticipate if you only put on
the board's people who come from the same schools and have the same
background," she said. "Given that women account for half of the
population and university graduates, there's no reason why this could not also
be true on company boards."
Reding, who was visibly
pleased, expressed her delight at the success of her idea. She tweeted a photo
of herself celebrating alongside von der Leyen, the first woman to ever chair
the EU's executive, on Twitter.