UPDATE: The European Commission sound a retreat on boardroom gender diversity

Following on from my blog ‘Women's Rights Storm the Rickety Workplace Citadel’, the European Commission have succumbed to pressure from Member States, most notably the United Kingdom, and altered initial plans to force a mandatory quota for gender balance in the boardroom.

 A draft Directive setting a quota for boardroom gender balance and rumoured to introduce Draconian penalties for non-compliant companies, was due to be published in October 2012 but after much furore the debate was extended into November 2012. The Commission have now published a much amended draft Directive, which proposes an objective for all EU listed companies to have 40% representation of the ‘under-represented sex’ on each board by non-executive directors (‘NEDs’), by 1 January 2020 or 1 January 2018 for companies predominantly owned or influenced by public bodies.

The Directive requires companies to put into place recruitment measures which give preference to female candidates, but only if they hold the same qualifications and credentials as male candidates. In addition, companies that are caught by the Directive must report to their relevant national authorities and print on their website details of the gender ratio on their boards. If they fail to meet the quota they must explain to the authorities why this is the case and also outline which measures they have adopted to remedy the situation.

Interestingly, the new Directive is relatively toothless as sanctions will only be enforced upon those companies that fail to introduce the necessary recruitment measures or fail to adhere to reporting requirements, which also include publishing quota gender targets for NEDs.

However, the measures only relate to companies which are incorporated in a Member State and have securities listed for trading on a regulated market in a Member State. The Directive does not apply to SME’s, which are those companies that employ less than 250 people and have an annual turnover of less than €50 million.

The Directive is currently passing through the EU legislative process after which time each Member State will have two years to implement the new legislation into national law.

There is no doubt that this is a step in the right direction regarding the long battle for boardroom gender equality, however, it serves as a mere pyrrhic victory with the final foray to be decided when companies are ‘forced’ to adopt the measures in 2020.