What is the EU Gender Balance Directive?

By Maria Sterndorff, Engagement Director at Living Institute


EU just tightened the reigns on their 2022 Directive on Gender balance with a new directive from December 28th, 2023, imposing their member states to by the end of 2024 implement the necessary legislation supporting the targets set in the initial directive. 


Wheels are in motion and demand a swift improvement in gender representation in listed organizations, impacting both boards of directors and management roles. 


The urgency is tangible, with a mere one-and-a-half-year window for substantial change – an unprecedented challenge for DEI laggards.




EU Directive on Gender-Balanced Boards 

Despite the obvious complexity of achieving compliance with the directive in the organizations, the targets and requirements are clear. Listed organizations within the EU and their overseas subsidiaries must reach one of two goals by June 30th, 2026. 

The minority gender must account for at least 40% of the seats on the board.

or

The minority gender must account for at least 33% of the overall director leadership in the organization (including the board).

Currently just about 19% of the Top Leadership in Denmark are women.

Gender Neutral Recruiting

The directive imposes gender-neutral recruiting, demanding from organizations to prioritize minority gender in situations where candidates are equally experienced. 

When appointing a new director, listed organizations must apply so-called: Clear, neutrally formulated, and unambiguous criteria before the selection process to enable the assessment of candidates. 

In cases where a candidate of the underrepresented gender is not offered a director position in favor of the overrepresented gender, they have the right to request disclosure of the selection process. 

The companies must declare:

• What preformulated qualification criteria – as mentioned the criteria for selecting a candidate must be in place ahead of the recruitment process.
• What the comparative assessment between the candidates was in the selection process
• What tilted the table in favor of a candidate not of the underrepresented gender?

In short, there will be a need for implementing a gender-neutral recruitment process where this type of information can be disclosed upon request.




Finally, listed companies must report yearly to their member state and publicly online about their status for gender balance under the ‘comply or explain’-principle. 




Sanctions for organizations trailing behind


The comply or explain principle provides some leeway for organizations trailing behind their peers. 


Provided you cannot comply with the targets in the directive by June 2026, the EU requires you to disclose your plan for achieving compliance. An organization would not be penalized for not meeting the objectives but for lack of gender-neutral recruitment and unsatisfactory reporting on plans to progress. 


It is still unclear what the nature of the penalties will be as they are decided upon in each member state with a deadline to impose such measures before December 28th of this year. 

The directive states that Member States must enforce penalties, that are effective, proportionate, and dissuasive.

So likely – like the GDPR legislation – penalties for incompliance are meant to hurt enough to enforce compliance. 


The short answer to what happens then is that we do not know yet. 


Despite the uncertainty, one truth stands out – immediate action is necessary. 




How do you start the cultural transformation?


Join our Webinar: How to create change and comply with EU Gender Balance Directive by June 2026