Regulatory Update: Trend of Rules for Female Representation on Boards

Transcript:

Aligned with the broader goal of advancing social sustainability, there is a growing trend of regulations seeking to improve gender equality within the corporate world. One key initiative is the EU’s Gender Equality Strategy, which strives to improve “gender balance” in the EU. 

A central regulation under this strategy is the EU Directive on Improving Gender Balance Among Directors. This directive stipulates a minimum target for listed companies to ensure board positions are filled by members of the underrepresented sex. For non executive positions, the figure is 40%, and for all director positions, it’s 33%.

Across numerous European countries including France, Germany, Italy, Spain, UK, and Switzerland, existing laws support gender representation through similar quotas or regulations around pay equity.

Other countries have rules dictated by their major stock exchanges, and some 19 stock exchanges globally have requirements around board gender diversity. Notably, in the US, NASDAQ requires most of its listed companies to have at least one woman on their board or explain why they do not meet this requirement. Clarity AI research suggests that the majority of NASDAQ companies already complied with this requirement, though we are aware of two companies who have added women to their board since the rule was passed¹. 

Diversity will continue to play a pivotal role in determining the long term success and sustainability of businesses. The increasing availability of social metrics are a key ingredient to drive this success.

¹Clarity AI has found that most Nasdaq companies already had at least one woman on their board by the time the rule was proposed. Out of the 18 companies that did not have any women on their board at the time two have since added women board members to comply.