EU strikes deal to impose 40% quota for women on boards of large companies by 2026

Gender quotas have been agreed upon by the European Union to ensure that women hold at least 40% of seats on corporate boards.

After a decade of impasse, the plan gained new traction this year, with renewed support from Germany and France, and a political agreement was ultimately struck on Tuesday between the European Parliament and the European Council.

By mid-2026, the Act mandates that women hold at least 40% of non-executive board seats and 33% of all board director positions in all 27 EU member states.

Companies that do not appoint enough women to their boards of directors risk being penalized and having their directorships revoked if they do not follow the law.

“Diversity isn’t just about being fair. It also encourages innovation and progress. In a statement, European Commission President Ursula von der Leyen stated, “The commercial case for having more women in leadership is evident.” “There are plenty of qualified women for top professions; they should be able to obtain them.”

A progression that is uneven

Women held 30.6 percent of boardroom roles across the EU last year, according to EU data, but this varied greatly by nation, with 8.5 percent of women on boards in Cyprus and almost 45 percent in France.

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Women on boards were first legally mandated in France in 2011. According to the European Institute for Gender Equality (EIGE), an EU institution, the country’s own 40% quota went into effect in 2017 and it is now the only EU country to have exceeded it.

With between 36 and 38.8 percent of women in the boardroom, Italy, the Netherlands, Sweden, Belgium, and Germany were the next best in class. Hungary, Estonia, and Cyprus lag far behind, with less than one out of every ten non-executive directors being female.

According to the EIGE, binding quotas have shown to be more effective in increasing the number of women on boards of directors than softer measures or no action at all.

What is going to be different?

Companies with at least 250 employees are required to follow the “Women on Boards” rule.

Its goal is to ensure that at least 40% of non-executive director positions, or 33% of executive and non-executive jobs combined, are held by women.

When two candidates are equally qualified for a job, the one from the underrepresented gender should be given preference.

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Listed businesses will be required to tell the competent authorities on a yearly basis on the gender representation on their boards of directors and, if the targets have not been fulfilled, how they intend to achieve them.

In a statement, the directive’s co-rapporteur, Social Democratic Austrian MEP Evelyn Regner, stated, “More women on boards makes companies more robust, more inventive, and will help to reform top-down systems in the workplace.”

“Selection processes must be based on clear, predetermined criteria, and only the best candidates will be chosen as a result of this agreement, thereby boosting the overall quality of boards.”

There will be consequences for businesses.

Over the following two years, member states must convert the directive into national law.

Companies, on the other hand, will have until June 30, 2026, to meet the new target. The Council proposed date of December 31, 2027, however, this is a shorter timetable.

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Companies that do not comply with selection and reporting duties will face “effective, dissuasive, and appropriate” sanctions under the EU proposal. Fines and the cancellation of disputed appointments could be among them.

As a kind of peer pressure and to encourage compliance, Member States will also be required to disclose information on enterprises that meet targets.

The European Parliament has asked for a later review of the directive’s scope to see if non-listed firms should be included.

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