The EU Board Diversity Directive: A Test of True Commitment

Without the EU's Gender Balance on Corporate Boards Directive, Boardrooms Run the Risk of Missing Female Board Members.

The EU's Gender Balance on Corporate Boards Directive takes effect in January 2025, mandating 40% representation of the underrepresented sex among non-executive directors and 33% among all directors for large listed companies. This milestone comes at a critical moment.

Despite decades of progress, board gender diversity is showing signs of stagnation – reflecting a broader trend where DEI initiatives face headwinds amid economic challenges.

Despite decades of progress, board gender diversity is showing signs of stagnation.

Working with boards across Europe, I've seen a concerning reality: tight budgets often push diversity down the priority list. What began as an observation from countless client conversations is also backed by data.

The data tells a story: board diversity jumped in the good times of the 1990s, got stuck after the dot-com crash, then picked up again in the 2010s. Today, as companies navigate inflation, geopolitical tensions, and market volatility, we may be approaching another inflection point.

While women's board representation has doubled to approximately 30% over the past 15 years, the absolute number of women on supervisory boards hasn't kept pace. Global data shows declining rates of new female director appointments, reminiscent of the sharp drop in female CEO appointments during the 2008 financial crisis.

Companies say they want diverse, inclusive cultures to tackle market changes, climate issues, and AI. But their actions show they're pulling back.

Companies say they want diverse, inclusive cultures. But their actions show they're pulling back.

It's a paradox: Boards cut diversity budgets when times get tough - although research shows diverse boards manage crises best. But money matters - when budgets shrink, we see who really backs diversity with action, not just words. True corporate commitment is tested during downturns.

Looking ahead, I nevertheless remain optimistic about board diversity's future - because businesses need it to succeed.

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ABOUT THE AUTHOR

• Marion Heil is the founder and managing director of Board+CEO Advisors. She is based in Vienna.