Gender quotas are coming – are you ready?
By: Sharon Peake, Shape Talent Founder and CEO
After 10 years of debate the EU has recently voted to mandate quotas for women in leadership roles in EU companies.
The legislation is expected to be passed by the European Parliament later this year, giving companies four years to move from the average of 30.6% of women on boards, to the new quota of 40%[i].
This is a landmark deal for gender equality and represents a seismic shift in the prioritisation of gender equality in the EU.
What will the new laws require?
From June 2026 companies with over 250 employees will be required to ensure:
- At least 40% of non-executive director posts are held by the “under-represented sex” (normally women)
- At least 33% of all board director roles – including non-executive directors and executive directors, such as CEOs and COOs – are held by women
The proposed legislation comes with tough penalties for non-compliance, including fines and annulments of board appointments.
What does this mean across the EU?
Compliance with these new quotas is going to require concerted effort across the EU. Kantar’s latest Gender Diversity Index shows huge variation in gender equality in corporate leadership across the EU and EEA.
Source: Kantar, 2021[ii]
France is the only EU country to currently exceed this threshold, with 45.3% of seats on boards occupied by women, while Norway (part of the EEA) has 41%. Whereas Cyprus, has by far the largest gap to address, with only 8.5% women on boards.
Do quotas really work?
In short, Yes, quotas help to move then numbers. It is no coincidence that the only two countries already exceeding the 40% threshold – France and Norway – have had quotas in place for 10 years and 16 years respectively.
France moved from 10% to 45% women’s participation on boards in 10 years, while Norway’s much more aggressive implementation window saw a 35% increase in seven years. Even in the UK, where a more modest voluntary target approach was taken in 2011, women’s representation on boards has tripled in 10 years from 12.5% to 36.2%.
It’s the old adage what gets measured gets done. So why should gender balance – now definitely shown to have quantifiable financial benefits for businesses – be any different?[iii]. And when targets are public, it adds a healthy level of competition to spur progress even more.
But what about the ‘quality’ of appointments?
This is an argument we hear all too often from those worried about over-fishing from a (presumably) small, qualified candidate pool and diluting the expertise and capability in their most senior roles.
These concerns do not manifest in reality, as the experience in Norway demonstrates powerfully. Researchers measured company stock performance from the period 2002 – 2008 (before and after the quotas were introduced in 2005) and found:
- No significant reduction in stock performance
- No negative impact on return on assets
- No rush to circumvent the laws by shifting from a listed to Ltd company.
They further found that[iv]:
- “The vast majority (85%) of board directors sat on only one board. This contradicts the assumption of a small pool of qualified women sitting on boards.
- If women directors were underqualified, boards would be forced to replace them more frequently. During the sample period, board member turnover stayed constant.
- New women on the board had necessarily less experience than veteran male board members. However, corporations responded to this issue by replacing the inexperienced men on their boards. The result: overall experience stayed level”.
These findings serve to categorically undermine the naysayers and sceptics.
What to watch out for?
If you ask any woman whether she wants to see quotas in her company, most will give a resounding No. Because no woman wants a situation where bystanders might question whether her hard-earned promotion was earned, or whether it was actually a result of a quota system. Similarly, few men are wild about the concept and what it might mean for them.
Importantly, when targets are implemented in the absence of a wider cultural programme of inclusivity, their effectiveness is significantly limited. Without changing the leadership role modelling and behaviours that set the tone for the organisation, and without addressing the underpinning gender stereotypes and barriers that hinder women’s progression, targets become little more than tokenistic.
What to do now?
Without a deliberate and focused strategy, many organisations will find themselves falling foul of the new quotas. Meaningful progress towards gender equality requires a multi-faceted approach. We advise organisations to address six elements on their change journey:
- Link change efforts to the business strategy. By making explicit the link between EDI (equity, diversity and inclusion) and innovation, customer insights, quality of decision making and other strategic imperatives, companies can lay the foundations for a successful change. This requires visible senior leadership commitment.
- Come up with a targeted plan. It’s critical to know your starting point. What is your HR data telling you about women’s representation at different levels of seniority, across different job functions and locations? What about recruitment, promotion, succession, performance review, talent and leaver data? Identify the two or three biggest challenges to focus on.
- Engage men. All too often diversity efforts are led by the minority groups most impacted. Engaging male champions is critical: gender equality in the workplace cannot be achieved without the active support of men.
- Build inclusive leadership capability. Inclusion happens in the everyday moments of leadership. Help your leaders build the curiosity and courage to understand and value difference and build inclusive workplaces.
- De-bias the system. Recruiting more women will have limited impact if the culture, practices and systems of the organisation do not lend themselves to gender inclusivity. Scrutinise your recruitment, promotion and reward practices in particular, where bias often lurks, and tighten these up.
- Develop women to build your pipeline. Carefully designed women’s development and acceleration programmes, sponsorship programmes and group and individual coaching programmes can all play a powerful role in equipping women with the knowledge, tools and support to accelerate their careers.
If you’d like to discuss how Shape Talent can support you on this journey do get in touch.
Sharon Peake is the founder and CEO of Shape Talent Ltd, the diversity, equity and inclusion experts for complex multinational organisations who are serious about gender equality – and what it can achieve for their business.
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[i] Women on boards: deal to boost gender balance in companies. https://www.europarl.europa.eu/news/en/press-room/20220603IPR32195/women-on-boards-deal-to-boost-gender-balance-in-companies
[ii] Gender diversity in corporate leadership. https://www.kantar.com/inspiration/society/gender-diversity-in-corporate-leadership
[iii] Gender Equity Insights 2020: Delivering the Business Outcomes. https://bcec.edu.au/publications/gender-equity-insights-2020-delivering-the-business-outcomes/
[iv] Quotas to gender-balance the board: Norway’s drastic action worked. https://www.ideasforleaders.com/ideas/quotas-to-gender-balance-the-board-norway%E2%80%99s-drastic-action-worked