Women on Boards Directive is an important part of the EU Gender Equality Strategy for 2020-2035. “Achieving gender equality in the workplace requires a comprehensive approach, which also includes fostering gender-balanced decision-making within companies at all levels, as well as closing the gender pay gap. Ensuring equality in the workplace is also a key prerequisite for reducing poverty among women” says the EU Directive.
The goal is to create gender balance among directors of listed companies by having a representation of at least 40% female non-executive directors or at least 33% of executive and non-executive women.
All listed companies will be required to provide information concerning their boards’ gender representation, as well as the measures they’re taking to achieve the goals set by the Directive. A list of companies that reach the requirements will be published annually by each Member state.
The Women on Boards Directive has entered into force in November 2022, and the Member states must deliver a report to the Commission about their results in implementing the directive until the end of 2025.
Researchers Di Miceli and Donaggio have performed a comprehensive literature overview regarding the correlation of company performance and the higher representation of women in business leadership positions, and the numbers are conclusive. They have found two sets of connections.
“The first is that having more women in business leadership positions leads to higher environmental, social, and governance standards, with a particularly clear connection when women comprise a critical mass of about 30 percent on company boards.”
“The second is that companies with enhanced ESG perform better on critical metrics: stronger internal control and management oversight, reduced risk of fraud or other ethical violations, positive workplace environment, greater stakeholder engagement, and improved reputation and brand.”
The literature overview shows the importance of women in business leadership for company’s social performance and corporate governance.
Having more female board directors is positively correlated with:
Firms with more women in leadership demonstrate a stronger emphasis on workplace environment, workforce issues, and worker satisfaction, including:
In the analysis of 400 U.S. companies performed yearly over the span of ten years, the authors conclude that businesses with greater representation of women are less likely to have internal control weaknesses.
Gender-diverse boards and female leaders are associated with enhanced firm Performance:
Gender-diverse boards are associated with increased board effectiveness:
Gender-diverse boards influence the nature, extent, and monitoring of reporting:
Considering that boards are built upon relationships, board members are mostly found through personal networks, from which women are usually excluded, and thus underrepresented in the board.
To appoint more women to the boards, CEOs and investors should seek out and engage with interesting executives in other social circles to build professional relationships with future female candidates. This will aid in creating a broader pool of qualified candidates who are just right to fill in the gaps in the company’s business.
On the other hand, board-interested women should impress their interest upon CEOs, investors, and board members. Remind them of their capabilities, become familiar with the company P&L, ask to be briefed on board content. The seniors in the company should inquire about attending or presenting at board meetings. Visibility and presence are important elements for potential promotions to the Board.
The researchers conclude that “equity and fairness should be sufficient justification for gender diversity, regardless of whether there is a utilitarian purpose for adding more women in business leadership. Building business institutions that are inherently fair and inclusive, to better reflect all company stakeholders and society as a whole, is a moral and ethical imperative of our times.”
