In November 2022 the EU passed Directive 2022/2381 on improving the gender balance among directors of listed companies as a key step towards achieving a gender balance in corporate governance. This is also known as the Women on Board Directive, which may create a false impression that only women should be appointed to the board in the future. This article aims to dispel this myth and describes the directive’s goals in more detail.
Latvia is to pass the directive into its national law by 28 December 2024, so we will soon be able to examine some legislative proposals (in our next article).
The directive seeks to secure a gender balance on the boards of listed companies. It’s important to note that the goal is to balance male and female directors by including whichever group is under-represented. A board or council with a female minority needs more women and vice versa.
The directive applies to all large companies established in the EU with shares that can be traded on a regulated market in one or more member states.
The directive does not apply to micro, small or medium enterprises.
If a parent company established in a member state meets the directive’s criteria, this does not mean that its subsidiaries are covered by the directive unless they themselves meet those requirements.
Listed companies have until 30 June 2026 to meet either of the following board gender-balance targets:
A company that does not meet either target will have to adjust its candidate selection process for board appointments or elections using clear and neutrally formulated criteria.
The company will have to favour an under-represented gender candidate when choosing from applicants with equal qualifications and competencies (unless there are some overriding legal grounds).
The company will also have to provide annual information on gender representation, as well as on reasons and measures it’s taking, or plans to take, to become compliant with the directive’s requirements. This information will have to be posted on the company’s website.
The member states will be publishing annual lists of companies that have met the target.
Each member state should provide for effective and proportionate sanctions, such as fines or role cancellation. Companies that have not met the target will have to set quantitative targets, put correct candidate selection processes in place and adopt anti-discrimination policies. A member state may also choose targets that prevent access to some previously available benefits or limit the scope for taking part in public procurement.
Both the directive and the national law will cease to apply on 31 December 2038.
While the latest statistics for 2023 are not fully available other than the Gender Equality Index, we can look at several studies where Latvia’s rankings in the EU vary depending on researchers and methodology:
If you have any comments on this article please email them to lv_mindlink@pwc.com
Ask questionThe European Union (EU) celebrates May as the month of diversity to highlight the importance of diversity and inclusion (D&I) in society. Diversity basically reflects the nature of a person’s unique and distinct qualities and relates to people’s different values in terms of gender, age, ethnicity, religion, sexual orientation, abilities and experience.
One of the signals indicating an organisation needs diversity management is a high level of subjective feelings of discrimination or injustice among its staff. Low innovation capacity or high staff turnover can also suggest its diversity and inclusion (D&I) practices are not successful. Yet these are just a few of the reasons why organisations turn to diversity management as a key priority.
Diversity in organisations does not primarily mean differences in people’s visual appearance, gender or skin colour. Organisations have both visible and invisible diversity that can be encountered at individual, group and department level. While the potential and challenges are lying hidden in what’s invisible, we are used to measuring and accounting for what’s visible. Why is this an issue? And what risks does it entail? This article explores the essence of diversity management, risks and the initial minimum policy to eliminate them.
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