The new Organic Law 2/2024 of 1 August on equal representation and balanced presence of women and men requires public and private companies to ensure a minimum representation of 40% of the under-represented sex on governing bodies.
The aim of this regulation is to promote gender equality, social justice and business competitiveness. To this end, it aims to achieve material gender equality in the governing bodies of companies.
This new Organic Law transposes Directive (EU) 2022/2381 of the European Parliament and of the Council of 23 November 2022 on a better gender balance among directors of listed companies. And we must be vigilant because it amends, among others, the Capital Companies Act and the Securities Markets and Investment Services Act.
Which companies have to comply with the Organic Law on Joint Representation
The new rules will be mandatory for:
- All listed companies
- Public interest entities that meet the following conditions:
a) More than 250 employees;
b) Annual net turnover of more than EUR 50 million or total assets of more than EUR 43 million.
Mandatory requirements
Organic Law 2/2024, of 1 August, imposes a series of requirements on the companies concerned. Some of the most relevant are:
- Gender quota on boards of directors. The sex less represented on these governing bodies must account for at least 40% of the total. However, the law stipulates that this rule does not have to be applied, although it does have to be justified, when the percentage of women exceeds 60%. Another exception is for public interest companies that are directly or indirectly controlled by a family. In these cases, executive and proprietary directors could be excluded from the calculations, at the company’s discretion.
- Mandatory annual reporting. Every year, companies must report on gender representation on their boards of directors, and on the measures taken to achieve this goal. Both the annual sustainability report and the company’s website must include information on required gender balance measures and possible sanctions.
- Sanctions. The Organic Law foresees sanctions for companies that do not comply with the objectives.
- Incentives: Companies that meet the objectives of the standard will benefit from incentives that could translate into competitive advantages.
Deadlines for implementation
The regulation establishes different deadlines for compliance with these quotas, depending on the profile of the obliged company.
- Listed companies:
- The 35 companies with the largest market capitalisation have until 30 June 2026 to reach 40% equal representation on their boards.
- All other listed companies will have a deadline of 30 June 2027.
- Public interest entities:
- They shall have reached 33% of the majority of the workforce by 30 June 2026.
- They have until 30 June 2029 to achieve a 40 per cent representation.
Conclusion
Facing this new law of equal representation and balanced presence of women and men will be a challenge for many companies. At Confianz we know this and we are prepared to help them meet all the requirements so that they not only guarantee compliance with current regulations but also increase the diversity and competitiveness of the company.