Women’s representation in French corporate management bodies – including boards of directors and executive committees – began evolving in the late 2000’s, kicked off by the modification of Article 1 of the French Constitution in 2008. The modification stated the principle that “the law shall promote equal access of women and men to electoral mandates and elective offices as well as professional and social responsibilities.” At that time, women represented less than 9% overall within French corporate management bodies.
Subsequently, in 2011 the legislator introduced legal requirements for gender representation on boards of directors within medium and large companies, through the Copé-Zimmermann Act. This law set a quota of 40% for the underrepresented gender on boards of directors, to be reached within five years, with an intermediate threshold of 20% within three years.
Ten years on, the Haut Conseil à l’Égalité (High Committee for Equality) has given a largely positive assessment of the law’s implementation. In 2020, the proportion of women directors among the largest French listed companies of the CAC 40 and the SBF 120 was 44.6% and 45.2%, respectively. Thanks to these results, France has the highest levels of women on boards in these main indexes within the European Union (2nd worldwide after Iceland with 46%). However, that same year, the overall proportion at smaller French companies was more limited, as only 35% of French public company directors outside of the SBF 120 perimeter were women. Granted, this situation is at least partially explained by the derogations for smaller boards or smaller companies outside the scope of the law.
In December 2021, France added a further legal layer by enacting the Rixain Act, which will impose quotas for all corporate management bodies. As far as existing soft law is concerned, the AFEP-MEDEF code merely recommends that “the board should determine gender diversity objectives for the management bodies. (…) The board should describe, in the corporate governance report, the gender diversity policy applied to the management bodies, as well as the objectives of this policy, the methods of its implementation, the results obtained during the past financial year, including, where appropriate, the reasons why the objectives were not achieved and the measures taken to remedy the situation“. However, the Middlenext Code, in its September 2021 revision, went further and anticipated the legislative change stating: “(…) taking into account the business context, the Board verifies that a policy aimed at gender balance and equity is implemented at each level of the company’s hierarchy“.
Many companies have sought to address the lack of higher female representation in executive bodies and managerial functions for several years, including through compensation policies. For example, in 2020-2021, around 59% of CAC 40 companies included at least one non-financial criterion in performance conditions of annual bonuses or long-term incentive plans focused on diversity or increased female representation on executive bodies and managerial positions to sharpen executive focus on the issue and possibly drive results.
In one example, Publicis Groupe includes specific criteria on this issue for both annual bonuses and long-term incentives for members of its Management Board. In 2019-2020 the Group’s Executive Committees met the 40% target of women on the managerial board. The next objective set out in the Executive Board’s LTIP 2021 is to reach 45% by 2025, with an indicative point of 43% in 2023. This proactive policy was proposed in advance of the Rixain Act and exceeds its minimum requirements. It also uses a similar methodology, based on a periodic assessment of the progress of the criterion in question.
Vivendi SE also highlighted the necessity to increase female representation in certain professions within the Group in 2020. The bonus awarded to its CEO in 2020 was dependent on achieving a rate of 42% of creative positions held by women within the Havas subsidiary. This criterion had relatively little weight however (2%, cumulatively with other criteria), and was replaced in the remuneration policy for 2021. Instead, the Group has now followed the goals of the Rixain Act more closely by implementing a performance criterion of reinforcing gender diversity in management bodies and positions of greater responsibility. At this stage, the use of such criteria seems relevant. Nevertheless, with the requirements established by law in the near future, meeting the minimum legal provisions may no longer be considered in future as adequate performance conditions.
The Rixain Act aims at having the same effect on executive committees and other similar management bodies that the Copé-Zimmermann Act had on Boards of Directors. In 2020, of the SBF 120’s executive committee members, only 21% were women and of that group only 10% held operational positions such as subsidiary manager.
Additionally, despite the overall success of the Copé-Zimmermann Act, there is still a lack of women appointed to leadership roles within many French management bodies. Indeed, among the French companies in the SBF 120, only fourteen have women CEOs or Chairpersons of Management Boards. This issue underlines the failure to promote women to executive corporate officer roles so far.
The gender quota principle in the Rixain Act will work in the same gradual way as with the Copé-Zimmermann Act, albeit with another challenge for many companies: the necessity to promote women within the company, through adapted HR mechanisms. The law will impose quotas of at least 30% of executives and members of management bodies to be from the underrepresented gender by 2027 and eventually reach 40% by 2030. This law defines management bodies as “Any body set up within the company, by any act or corporate practice, for the purpose of regularly assisting the bodies responsible for general management in the performance of their duties, shall be considered a management body.”
Companies that do not comply with these obligations will be subject to a financial penalty of up to 1% of their payroll. Additionally, negative market reaction or stewardship engagement with investors and shareholders might incentivize companies to comply earlier. To date, some investors, such as the members of the 30 Percent Club, have been proactive on this issue. On another note, the law may have a weakness in that the new legal obligations could possibly lead to the constitution of shadow management bodies, possibly circumventing its purpose.
Changes are also expected at the European level regarding gender diversity, although only in terms of board representation for the time being.
The European Commission has announced that an agreement has been reached regarding a European directive comparable to the Copé-Zimmermann Act. Under the new rules, listed companies in EU member states must ensure that by mid-2026 women hold at least 40% of non-executive positions on their boards, and hold at least 33% of executive and non-executive board positions. This directive had originally been proposed in 2012 but was obstructed by the skepticism of several member states, which preferred local legislations or soft law incentives on the matter. No evolutions comparable to the Rixain Act targeting executive bodies are expected at the European Union level at this stage.
By: Sofian Ounaha, French Research, ISS Governance
Cyril Levavasseur, French Research, ISS Governance
