In a major move towards improving gender equality in corporate leadership, the European Commission has formally launched its Gender Balance on Corporate Boards Directive, which came into force at the end of December 2024. This directive aims to ensure a more balanced representation of genders on the administrative and oversight boards of companies across the European Union.

The directive is a response to the ongoing gender disparity observed in leadership positions, particularly in corporate boards. It is specifically targeted at enhancing gender balance within larger companies, with a focus on non-executive and executive director roles. However, micro, small, and medium-sized enterprises (SMEs) are excluded from this requirement, allowing for a focus on larger, publicly listed companies that can set an example for broader industry trends.

The Directive’s primary provision, outlined in Article 5, offers EU Member States two options for achieving gender balance. The first is ensuring that the underrepresented gender holds at least 40% of non-executive director positions. Alternatively, companies can aim for a broader measure: achieving 33% representation of the underrepresented gender across all director positions, including both executive and non-executive roles. 

The distinction between these roles is important, as executive directors typically manage the day-to-day operations of a company, while non-executive directors oversee corporate governance.

While the directive provides clear targets, the onus falls on EU member states to implement these measures at the national level. Member States were given until December 28, 2024, to transpose the directive into their national laws. As of now, 12 Member States have yet to notify the European Commission of their transposition, putting them at risk of enforcement action, which could lead to fines.

This development is part of the European Commission’s broader “Gender Equality Strategy 2020-2025.” The directive plays a key role in achieving one of the five objectives of this strategy—improving gender representation in decision-making and leadership positions. After a decade-long negotiation process, this directive represents a significant milestone in the EU’s commitment to gender equality.

Historically, corporate governance in the EU has emphasized shareholder rights to nominate and select board members. The introduction of this directive further aligns these practices with modern societal goals of equality. However, the success of its implementation will depend on how national governments approach the directive’s transposition and whether companies adhere to the spirit of gender balance.

As we move forward into this new era of corporate governance, this directive signals a critical shift in the European Union’s approach to gender equality in leadership roles. It will be interesting to monitor how the directive impacts the corporate landscape and whether it encourages similar initiatives worldwide.