Boardrooms in Balance: Why Gender Diversity is Now a Governance Must
By: Dori Felber, reading time: 4 minutes, 58 seconds
Ensuring balanced representation on corporate boards has moved from a mere social objective to a legal and governance priority across the EU. On 17 October 2022, the Council adopted its final text on gender balance in the corporate boards of listed companies (Directive 2022/238). How did this Directive impact corporate governance? In order to answer such a question, it is first necessary to outline what the Directive entails: its objectives, policy background and scope. Only then can we meaningfully assess its legal and practical implications for corporate governance across Member States.
All about Directive 2022/238
Equality of treatment and opportunities between women and men is among the principles set out in the Treaties of the EU, and after the harrowing figures published in 2022, revealing that only 32.2% of board members and a mere 8% of board chairs were women, underscored the persistent gender imbalance in corporate leadership. These statistics have made it evident that concrete steps must be taken in order to “help [to] remove the obstacles women often face in their careers”. Thus, the primary objective of Directive 2022/238 is to achieve a more balanced representation of women and men among directors in listed companies by increasing transparency and accountability, as well as by imposing binding quantitative gender‐representation targets for boards. The Directive will apply to listed companies with registered offices in EU Member States, requiring them to have at least 40% of their non-executive director positions or 33% of their non-executive and executive director positions held by women by 2026.
How does this link to corporate governance?
The growing emphasis on board diversity extends beyond the pursuit of social equality. Corporate governance also closely interconnects with board diversity, with three main logics shaping how the two interact. Regulators and policymakers now treat board composition as a risk-management and oversight issue. According to the OECD, female directors bring more independent views into the boardroom and strengthen its monitoring function by counteracting groupthink. More diverse boards promote a wider range of perspectives, thereby reducing groupthink and improving the monitoring of management and risk oversight, ultimately enhancing corporate governance overall. Both the OECD and the Commission cite evidence that quotas, disclosures, transparency and other measures substantially increase the representation of women on corporate boards, as well as their effectiveness.
Continually, investors and financial markets have increasingly viewed gender-balanced boards as a core element of good corporate governance, rather than a mere social issue. Large investors and investment advisors such as BlackRock, as well as ESG frameworks, have continuously pushed for better board composition as part of the fiduciary assessment of long-term value and governance quality. This means that boards that ignore diversity risk negative votes, reputational damage, or even tougher scrutiny during capital raises.
The third governance logic behind board diversity is business performance, although debated, it still remains relevant in governance circles. Major empirical reviews reveal a favourable relationship between diverse leadership teams and financial outperformance for many organisations, and policymakers cite these findings to argue that board diversity promotes long-term corporate performance. That economic framing pushes diversity into board agendas as a criterion of effective governance, rather than just justice. There remains ongoing academic debate regarding the causation and robustness of these findings; nonetheless, McKiney represents the mainstream practitioner position, whilst the OECD provides a broader policy synthesis.
The EU Directive 2022/2381 marks a defining moment in the evolution of European corporate governance. What began as an equality measure has evolved into a governance reform that incorporates diversity into the core values of board responsibility, openness, and strategic oversight. The Directive's ultimate impact, however, will be determined by how companies internalise these obligations: whether they view gender balance as a compliance checkbox or an opportunity to transform decision-making culture and long-term resilience.
