Why gender balance on boards is now a legal target
Balanced boards have long been a matter of policy and voluntary codes. With the EU Gender Balance on Corporate Boards Directive – Directive (EU) 2022/2381, widely known as the Women on Boards Directive – it has become a hard legal requirement for larger listed companies. Member States had to transpose it into national law by 28 December 2024, and the substantive targets were to be met by 30 June 2026. For affected companies, board composition is no longer just a governance ambition; it is a compliance obligation.
Who the directive applies to
The rules target companies listed on an EU-regulated market that meet size thresholds – broadly, more than 250 employees and either an annual turnover above €50 million or a balance-sheet total above €43 million. Small and medium-sized enterprises fall outside the scope. If your company is listed and above these thresholds, the directive’s targets and procedures apply directly to how you appoint directors.
The two targets companies can choose between
A covered company must ensure that members of the under-represented sex hold at least 40% of non-executive director positions, or at least 33% of all director positions counting both executive and non-executive roles. Member States could choose which target applies. The point is a concrete, measurable floor for representation rather than a vague aspiration.
Transparent, merit-based selection
Beyond the numbers, the directive requires that board appointments follow clear, pre-established and neutral criteria. Where a company has not met its target, it must apply a transparent selection process and, when two candidates are equally qualified, give priority to the under-represented sex. Companies must also report annually on their gender balance and, if targets are unmet, explain why and what they are doing about it.
Practical example
A Swedish listed company with 400 employees reviews its board and finds women hold only a quarter of non-executive seats. To move towards the 40% target, it documents objective selection criteria, opens its nomination process, and ensures that where candidates are equally qualified the under-represented sex is preferred. It records each step, so that its annual report can show a transparent, defensible process even while it works towards full balance.
Common mistakes companies make
The first mistake is assuming Sweden’s already relatively high board diversity means no action is needed – the legal obligations on process and reporting apply regardless of current numbers. The second is treating the target as the whole duty; the transparent selection procedure and annual reporting are separate requirements. The third is underestimating enforcement: Member States must provide effective, dissuasive penalties, which can include fines and, in serious cases, annulment of non-compliant board appointments.
Recommended actions
Confirm whether your company is in scope. Measure your current board composition against the 40% or 33% target that applies. Formalise objective, pre-established selection criteria and a transparent nomination process. Put annual gender-balance reporting in place. Where you are below target, document your selection decisions carefully – a well-evidenced, merit-based process is your best protection.
Frequently asked questions
Which companies must comply?
Companies listed on an EU-regulated market with more than 250 employees and turnover above €50 million or a balance sheet above €43 million. SMEs are excluded.
What were the deadlines?
National transposition was due by 28 December 2024, and the representation targets were to be met by 30 June 2026.
What happens if a company misses the target?
It must apply a transparent, merit-based selection process, report on and explain the shortfall, and may face penalties provided under national law.
Conclusion
The Women on Boards Directive turns gender balance from good practice into a measurable legal standard for larger listed companies, backed by transparent procedures and reporting. Even companies close to the targets must adapt their selection and disclosure processes. Lawgent advises listed companies on board-composition compliance, nomination procedures and reporting. Get in touch to make sure your governance meets the new requirements.
