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Article | Global News Briefs

European Union: New Directive on gender balance of boards

By Eva Jesmiatka and Tamsin Sridhara | January 27, 2023

Employers should start planning now for the June 2026 deadline for achieving gender balance and diversity on EU company boards.
Inclusion-and-Diversity|Executive Compensation|Compensation Strategy & Design

Employer Action Code: Act

Ten years after it was first proposed, the European Union (EU) Directive (2022/2381) on improving the gender balance among directors of listed companies was recently finalized and took effect at the end of 2022. Member states have two years to adopt conforming legislation, if necessary, to require in-scope companies to meet gender representation quotas on their boards by the end of June 2026.

Key details

  • The Directive will apply to companies listed in any regulated EU market, except those with fewer than 250 employees and annual revenue no more than 50 million euros or a balance sheet total no more than €43 million.
  • Under the Directive, by June 30, 2026, companies must ensure that members of the underrepresented sex must hold at least 40% of non-executive director positions or at least 33% of executive and non-executive director positions in total. Individual member states may decide which of these mandates to implement. Companies not subject to the latter quota must set and meet individual quantitative objectives to improve the gender balance among executive directors by June 30, 2026.
  • Companies will be required to apply clear, neutrally formulated and unambiguous criteria in a non-discriminatory manner throughout the board member selection process. Where candidates are equally qualified, priority should generally be given to the one belonging to the underrepresented sex.
  • Companies will be required to report annually to the competent national authorities about the gender representation on their boards and publish the information in an easily accessible manner on their websites. Member states will have to maintain a public list of companies that have met their representation goals.
  • Member states must set up a penalty system (e.g., fines) for companies that fail to meet the new standards by June 30, 2026.
  • The Directive permits member states to opt out of certain requirements if they already have sufficiently balanced board representation or existing national laws that require certain levels of gender representation (e.g., Germany’s FüPoG legislation).

Employer implications

Only 30.6% of board members in the EU’s largest listed companies in 2021 were women, with significant differences among member states (from 45.3% in France to 8.5% in Cyprus). Many employers will need to act to meet the June 2026 deadline for achieving the applicable board gender balance target.


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