The Women on Boards Directive: Is Europe closer to breaking the glass ceiling?

Instituting gender quotas is a controversial approach to achieving gender equality. The question is: does it take us a step closer to breaking the glass ceiling?

Author: Enrique Fayos, IE Law School alumni,  XIII José María Cervelló Award winner

Gender quotas—aimed at balancing gender representation and eliminating gender inequality—have suffered a strong backlash from broad sections of society. Some see these quotas as, ironically, a discriminatory measure, groundlessly favoring women whether or not they are the most qualified candidate for any one position. With the EU proposing new legislation aimed at tackling gender discrimination on corporate boards, this article reflects on whether there is any truth to these claims, and how far the new directive goes to breaking the glass ceiling.

I must confess that before exploring the subject of positive action, I was strongly against preferential treatment measures. As the topic fascinated me, I decided to write the essay “Breaking the glass ceiling: gender imbalance in Spanish Corporate boards” – awarded with XIII José María Cervelló Award—around this topic.

Writing completely changed the way I felt about gender quotas and today I truly believe that gender quotas are a useful and legitimate tool to foster gender equality in corporate boards across the EU.  Hence, as I asserted in the abovementioned essay, breaking the glass ceiling is not only necessary from a human rights standpoint, but will also ripe enormous economic benefits that will profit our society as a whole.

The term “glass ceiling”: A concept that needs to be shattered

The term “glass ceiling” was first used 40 years ago by management consultant Marilyn Loden during a panel discussion on women’s aspirations. Nowadays, the expression has become a powerful metaphor for gender discrimination, embodying the invisible barrier that blocks women from reaching top managerial positions.

Legal intervention can play its part in driving positive action, by implementing initiatives to support women in overcoming obstacles in modern society and, particularly, employment.

What does the glass ceiling look like today? A quick look at the data out there is less than encouraging. According to the American business magazine Fortune, in 2019 only 6.6% of the CEOs of the world’s largest companies were female. In Spain, albeit enormous progress in this field in the last few decades, women represent only 19% of management boards and 11% of executive committees.[1] Spain remains slightly below the EU average, with the average share of women on boards of the largest publicly listed companies standing at 23.7% in 2018—three points below the average for all EU member states at 26.7%.[2]

The Women on Boards Directive: Is Europe closer to breaking the glass ceiling?

Gender imbalance: Positive action in the Spanish legal system

Positive action is embedded in our legal order in three distinct ways. Firstly, by the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW), adopted in 1979 and ratified by Spain in 1984. This was the first legal instrument to recognize the necessity of states adopting appropriate measures to eliminate discrimination against women. Secondly, by the Spanish Constitution itself, which encourages the implementation of positive action measures by public authorities to achieve gender balance while recognizing equality in Article 14 (see Article 9.2 CE). Last but not least, positive action is enshrined in Article 157 of the Treaty on the Functioning of the European Union, which declares that “the principle of equal treatment shall not prevent any Member State from maintaining or adopting measures providing for specific advantages in order to make it easier for the under-represented sex to pursue a vocational activity or to prevent or compensate for disadvantages in professional careers.”

While the above is positive, there is more that could be done. Preferential treatment schemes or, specifically, gender quotas in corporate boards, are one of the most widely used forms of positive action. This type of measures, although often sparking controversy in the public debate, have reaped outstanding results with regard to gender balance in very short periods of time.

For instance, through the enactment of binding gender quotas, Italy and France increased the presence of women in corporate boards by 25.5% and 24.8%, respectively, in less than six years. In the same vein, following the introduction of binding quotas, Norway increased its female share in corporate boards to 40% in only three years. Spain also introduced gender quotas in 2007, although no sanctions were set for non-compliant companies and, therefore, self-enforcement by Spanish companies has been negligible.

The Women on Boards Directive: The Commission’s proposal to breaking the glass ceiling

In November 2012, the Commission presented a proposal for an EU Directive to encourage gender balance on corporate boards in European companies (the Women on Boards Directive).[3] The purpose of the proposal was to reach a minimum representation of 40% of women in non-executive board positions of listed companies, excluding small and medium enterprises.  The scope of the proposal was to be limited in time, applicable only until gender balance was effectively achieved, and would apply to approximately 5000 listed companies in the EU.

The decision to focus solely on non-executive directors stemmed from the aim of the Commission to preserve the right balance between the need to increase gender diversity on boards, and the need to comply with the right of minimum intervention in the day-to-day management of companies. What’s more, the proposal only applies to listed companies. This recognizes their economic and symbolic importance for society, with the hope that these companies would set standards to be closely followed by smaller organizations.

Proposal for a Directive of the European Parliament and the Council on improving the gender balance among non-executive directors of companies listed on the stock exchanges and related measures, Brussels, 14 November 2012, COM (2012) 614 final.

A quota system can become a powerful instrument in flagging talent which would otherwise remain unseen due to cultural prejudice.

One of the key aspects of the proposal requires companies to implement a transparent recruitment process for non-executive directors. The Commission believes that one of the reasons why the glass ceiling has remained practically indestructible is due to a lack of transparency in selection processes. This means that prejudices linked to gender bias, deeply rooted in our culture and society, may hinder women’s opportunities for being chosen for top management positions—despite being equally or better qualified than male candidates. This measure would ensure that companies appointed candidates based on a neutral comparative analysis of their qualifications, while applying pre-established, clear, formulated and unambiguous criteria. Only in the event that candidates were equally qualified would preference be given to women, closely complying with the case law of the European Court of Justice on gender quotas.

In contrast to what opponents to the Women on Boards Directive might argue, this initiative actually ensures that selection processes in European listed companies are more focused on meritocracy. In certain ways, a quota system can become a powerful instrument in flagging talent which would otherwise remain unseen due to cultural prejudice.

The Women on Boards Directive: Is Europe closer to breaking the glass ceiling?

The current status of the proposal: Ending the deadlock

Even though the proposal was widely supported by the European Parliament, it faced much resistance within the Council and, consequently, has remained in a deadlock ever since. In its Resolution of 13 February 2019, the European Parliament urged the Council to unblock the Women on Boards Directive to “address the considerable imbalance between women and men in economic decision-making on the highest level”, but no steps have been taken since.

Nevertheless, last October the newly elected commissioner for Equality, Ms. Helena Dalli, declared during a press conference that she was committed to unblocking the Women on Boards Directive. Moreover, recent presidencies of the Council of the EU, such as that of Romania (from 1 to 30 June 2019) have also promised to break the deadlock.

It remains to be seen whether the promises made by the new commissioner turn out to be true. However, one thing is clear: the glass might not have shattered yet, but the dream of a truly equal Europe is closer than ever.

Enrique Fayos

Enrique Fayos is a junior associate at Callol, Coca, & Asociados, based in Madrid, where his practice focuses on EU and Competition Law. Prior to that, he interned in the competition department of an international law firm in Barcelona. Enrique is a graduate of the Universidad Pontificia Comillas (ICADE) and holds a double LLM in Corporate Law from IE Law School. His essay, “Breaking the glass ceiling: gender imbalance in Spanish corporate boards,” was awarded with the XIII José María Cervelló Award, and chosen as the winning entry in the contest organized by IE Law School and the Spanish law firm Ontier.

Note: The views expressed by the author of this paper are completely personal and do not represent the position of any affiliated institution.

[1] Based on data drawn from Women matter 2017: a way forward for Spain.
[2] Based on data drawn from the 2019 Report on Equality between women and men in the EU, issued by the Directorate-General for Justice and Consumers of the European Commission.
[3] Proposal for a Directive of the European Parliament and the Council on improving the gender balance among non-executive directors of companies listed on the stock exchanges and related measures, Brussels, 14 November 2012, COM (2012) 614 final.