Legal Alerts/4 Jan 2023

EU Seeks to Boost Gender Equality on Corporate Boards with a New Directive – What Is the Impact on Finnish Companies?

In November 2022, the European Parliament formally adopted a directive seeking to improve the gender balance among directors of listed companies – after a 10-year wait. The European Commission had initially proposed the directive in 2012, but it was not adopted until 2022 when a consensus was reached between all Member States. The Member States must implement the Women on Boards Directive within two years from its publication in the Official Journal, i.e. by 28 December 2024.

The directive aims to achieve its goal by implementing quotas on the proportion of seats filled by the underrepresented sex. In addition, it aspires to ensure that board appointments are transparent and that candidates are assessed objectively based on individual merits, irrespective of gender. We discuss the directive and its implications for Finland in more detail in this legal alert.

Scope of application, minimum requirements and reporting obligation

The directive applies to listed companies while small and medium-sized listed companies with fewer than 250 employees are excluded from its scope. In Finland, the scope of the directive covers boards and supervisory boards but excludes the management team, as it is not a corporate body recognised by the Finnish Limited Liability Companies Act.

Pursuant to the directive, the Member States must ensure that members of the underrepresented sex hold either 40% of non-executive director positions or 33% of all director positions, including both executive and non-executive directors, by the end of June 2026. Furthermore, companies must provide the competent authorities with information about the gender distribution of their boards and the measures they are taking to achieve this 33% or 40% objective once a year.

The same information must also be published in an appropriate and easily accessible manner on the company’s website. In addition, the Member States must regularly publish a list of companies that have achieved the directive’s objectives.

Penalties and consequences if the minimum requirements are not achieved

Infringements of the directive may result in penalties. The Member States must introduce effective, proportionate, and dissuasive penalties for companies that fail to comply with national rules implementing the directive. Such penalties may comprise fines or the possibility for a judicial body to annul the appointment of a specific director. Furthermore, listed companies that do not achieve the aforementioned quotas must adjust their process for selecting candidates to serve in director positions.

Firstly, candidates should be selected based on a comparative assessment of their qualifications, and clear, neutrally formulated and unambiguous criteria should be applied in a non-discriminatory manner throughout the selection process. In addition, when choosing between equally qualified candidates, priority should be given to the candidate of the underrepresented sex.

Any candidate who was considered for a board position is also entitled to request to be informed of the qualification criteria upon which the selection was based and the specific considerations exceptionally tilting the balance in favour of a candidate of the overrepresented sex.

Interestingly for Finland, the directive allows for those Member States where members of the underrepresented sex hold at least 30% of non-executive director positions or at least 25% of all director positions in listed companies to suspend the application of the said selection procedure provisions. Finland currently qualifies for this exemption – albeit just barely.

Finnish goals and self-regulation

Pursuant to the Finnish Government’s action plan for gender equality 2020–2023, both genders should have a representation of at least 40% on the boards of large and medium-sized listed companies. This goal should be principally achieved in keeping with the recommendations of the Finnish Corporate Governance Code and through the companies’ own actions. Currently, approximately 31.5% of board members and approximately only 8% of board chairs in Europe are women. The Finnish Chamber of Commerce regularly reports on the proportion of women serving on the boards of Finnish listed companies, and according to its survey published in July 2022, the respective numbers are 31% and 10% in Finland.

For example, the Code provides that both genders must be represented on a listed company’s board, and listed companies must define and report on the principles they apply with regard to ensuring the diversity of their boards. Factors to be considered may include, for example, gender.

Furthermore, pursuant to the Code, when companies report on their diversity principles in their annual Corporate Governance Statement, this report should always include at least the objectives relating to both genders being represented on the company’s board of directors, the means to achieve these objectives, and an account of how much progress has been made towards achieving them. The Code is applied on a “comply or explain” principle.

Relevance for Finland?

The relevance of the directive has been questioned in Finland where good results regarding gender diversity on corporate boards have already been achieved with the traditional Finnish tools in this field, such as soft-law recommendations and self-regulation.

In addition, the directive will only apply to board and supervisory board positions. However, the proportion of women in management positions may be an even more critical factor as future board members are often selected from amongst persons in these positions, such as CEOs or CFOs.

Indeed, according to a December 2022 survey conducted by the Finnish Chamber of Commerce, the proportion of women holding managerial positions in both business and financial functions is overall at a rather low level in Finland. The survey questions whether the quotas introduced by the directive will actually result in a decrease in the number of women serving on management teams as many of them may choose to leave their current positions on their journey to become board professionals.

Calls for a more comprehensive approach

On a more general level, the directive’s approach, which is based on traditional notions of gender, has also been called into question. Many have noted that, in today’s world where more and more people do not identify as either sex, it might be time to complement the objective of gender equality with more comprehensive notions of diversity.

The Borenius lawyers named below would be delighted to answer any legal questions you may have with regard to the directive. Please do not hesitate to contact us for more information.

Share on LinkedInTweet about this on XShare on Facebook


Additional information

Mia Mokkila



Andreas Doepel

Senior Counsel, General Counsel


Aksu Tuominen


Helsinki, London