Policy Outlook

Equality on Boards

For many years, the introduction of regulation to enforce gender equality in leadership positions has been gaining momentum. Mandatory gender quotas for corporate boards have been introduced, or are being negotiated, in many jurisdictions, such as Austria, France, Germany, Italy, Spain, Switzerland, and Turkey. A heated debate is currently taking place in California due to a lawsuit filed in August 2019 that challenges the minimum female board member quota adopted by the state in 2018.

Lately, equality on boards has evolved to encompass a more inclusive view. With a focus not only on gender, many board diversity initiatives include other diversity characteristics, such as race, age, ethnicity, religion, nationality, disability, sexual orientation, and/or cultural background. For example:

  • In the USA, the Division of Corporation Finance of the Securities and Exchange Commission (SEC) addressed board diversity disclosure in 2019 through two identical Compliance & Disclosure Interpretations under Regulation S-K. In addition, numerous Democratic members of the US Congress have been pushing for greater board diversity disclosure. In February 2019, the Improving Corporate Governance Through Diversity Act of 2019 was introduced in Congress, followed by the June 2019 Diversity in Corporate Leadership Act of 2019.
  • In the EU, Directive 2014/95/EU requires certain large companies to disclose information on their adopted board diversity policy. The diversity aspects “should, in general, cover age, gender, or educational and professional backgrounds”, and where relevant also “socioeconomic background”.

While these more inclusive board diversity initiatives are far from introducing mandatory quotas and only focus on disclosure, it can still be qualified as an important first step towards improving diversity on boards and goes in hand with the growing investor pressure to make this happen.

To keep up with this fast-evolving regulatory landscape, visit the Policy Outlook. If you have any questions, please do not hesitate to contact us.

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