Time for change at large listed companies: The Women on Boards Directive
The first proposal of Polish regulations implementing the EU’s Women on Boards Directive, aimed at more balanced representation of women and men on the bodies of large listed companies, has now been published. This is to be achieved by setting requirements for the selection process of candidates for these positions and introducing a minimum level of participation of the underrepresented sex. The proposal comes as no surprise. Work on the directive took a decade, but it nevertheless elicited many comments in public consultations. The member states have to implement the directive by 28 December 2024.
The proposed regulations apply to companies registered in Poland with at least one share admitted to trading on a regulated market, but excluding micro, small and medium-sized enterprises (employing fewer than 250 employees, with an annual turnover of no more than EUR 50 million or an annual balance sheet total of no more than EUR 43 million). According to the explanatory memorandum to the bill, more than half of the companies listed on the Warsaw Stock Exchange would be exempt from the new provisions. They would cover only about 200 of the largest listed companies. Nevertheless, due to the special economic importance of these companies, their visibility and impact on the market as a whole, they are expected to set an example for other market participants, so the actual impact of the new provisions will be greater.
Based on the proposal, large listed companies will be required to achieve a 33% share of the underrepresented sex (usually women) on both the management board and the supervisory board, i.e. in each of these bodies separately, no later than 30 June 2026. (Currently, under the Best Practice for WSE-Listed Companies, the gender diversity requirement is met if the minority share on a given body is no less than 30%.) In practice, the number of positions considered necessary to achieve this objective is the whole number closest to the percentage of 33%, but not exceeding 49%. Sample numbers (depending on the number of positions on the boards) are shown in the annex to the directive. The Polish proposal is more favourable to members of the underrepresented sex than the minimum requirements defined in the directive, as it covers each board separately, rather than collectively, which is allowed under the directive.
Pursuant to Art. 5(1) of the directive, member states shall ensure that listed companies are subject to either of the following objectives, to be reached by 30 June 2026:
- Members of the underrepresented sex hold at least 40% of non-executive director positions
- Members of the underrepresented sex hold at least 33% of all director positions, including both executive and non-executive directors.
And under Art. 9 of the directive, “Member States may introduce or maintain provisions which are more favourable than those laid down in this Directive to ensure a more balanced representation of women and men in respect of listed companies incorporated in their national territory.” Unsurprisingly, during the public consultations, critics attacked the heightened requirements, and called for the national law to mirror the options available under the directive, i.e. a minimum of 33% for both bodies combined, not necessarily for each body separately.
Based on the new proposal, candidates for positions on corporate bodies will be selected on the basis of a comparative assessment of each candidate’s qualifications, applying in a non-discriminatory manner clear, neutrally formulated and unambiguous selection criteria taking into account the candidates’ qualifications and the need to ensure gender balance.
Each company’s general meeting should pass a resolution adopting a hiring policy for corporate boards, to be posted on the company’s website. If the selection process poses a choice between candidates with equivalent qualifications, as a rule preference should be given to the candidate from the underrepresented sex. With regard to these requirements, the comments submitted in the public consultations seek to delay the obligation for public companies to adopt such hiring policies due to the difficulties associated with holding general meetings. Under the current wording of the proposal, this obligation will come into effect when the act as a wholetakes effect, i.e. on 28 December 2024.
The company’s management board should draw up a report on gender representation on the company’s bodies and the measures taken to achieve gender balance among board members, for submission to the government official responsible for equality by 15 March each year, and also post the report on the company’s website. Since the first reports would not be submitted until 2027, it was proposed in the public consultations that reporting obligations be addressed by 30 June 2026, when key provisions of the act take effect.
A person whose rights have been violated in the selection of candidates for board positions will be entitled to compensation in an amount not lower than the minimum wage. The act reverses the burden of proof. Once it is shown that the unsuccessful candidate has equivalent qualifications to the successful candidate, the company must prove that it has not committed any violation. In public consultations, it was argued that the minimum compensation is grossly inadequate for board positions in large listed companies, and should be increased to a multiple of the gross minimum wage or the gross average wage.
Failure to comply with these rules will expose the company to a fine of up to 10% of the total annual revenue in the last audited annual financial statement, to be imposed by the Polish Financial Supervision Authority. Here also the act reverses the burden of proof—once it is shown that company failed to comply with its obligations in this regard, the company must prove that it has not committed any infringement. The public consultations drew comments on the proposed fine. Some argued that it was disproportionately high, proposing to cut it to a maximum of 1% of revenue or PLN 1 million, while others claimed that the fine was inadequate and the sanctions should also include:
- Invalidation of the resolution appointing a board member contrary to the requirements of the act
- Termination of the mandates of board members if their election did not meet the requirements of the act, or
- Suspension of pay for board members not meeting the requirements for gender balance.
Currently, the vast majority of large listed companies in Poland do not meet the criteria for participation of the underrepresented sex set forth in the directive, let alone the more demanding standards in the Polish proposal. For example, a study published by the Business Women Leaders Foundation found that the share of women on the management boards of listed companies has hovered around 11% in recent years, and on supervisory boards has risen slightly, to around 17%. The highest female participation rate was recorded in WIG20 companies, with about 14% on management boards and 26% on supervisory boards. But even these figures fall short of the European average of about 24% for executive directors and 38% for non-executive directors. Similar findings were made in a more recent study as of the end of 2023 by 30% Club Poland, covering WIG140 companies (i.e. all companies included in the WSE’s blue-chip WIG20 index, mid-cap mWIG40 index, or small-cap sWIG80 index).
The key provisions of the act are to enter into force on 30 June 2026 (the proposal also provides for an earlier date of 31 December 2025 for state-owned companies).
Aleksandra Fizek, M&A and Corporate practice, Wardyński & Partners
