The Parity Act, Organic Law 2/2024, of 1 August, on equal representation and balanced presence of women and men (the Act), came into force in August 2024. It implements the EU Directive 2022/2381 on improving gender balance among directors of listed companies and related matters into Spanish domestic law, and seeks to guarantee the effective representation of women in high level positions and decision-making bodies in political and economic life.
This time around, Spain is on time!
The Act has rules for electoral lists, public entities and bodies, unions, employer’s associations, professional associations/bodies, e.g. lawyers bar, physicians’ professional associations. But let’s focus on the situation of corporations.
Prior to the implementation of the Act, Spain had recommendations in place, both in law and in their Corporate Governance Code, that companies should achieve balanced representation of men and women on their Board of Directors by 2015. Notwithstanding some advancements, the goal of gender parity was not achieved, and effective parity is far from being a reality, which is in part why this new framework is being adopted.
According to the Act, listed companies must ensure a balanced representation on their Board of Directors. Balanced representation between men and women is defined by the Act as representation where no more than 60 per cent of members on the Board are of one given gender. However, the law provides for the possibility to have more than 60 per cent women if this is duly justified.
If there is not a balanced representation on the Board, the hiring processes for new Directors should be adjusted in order to ensure that balance representation is achieved. This must be done through an objective and neutral process using transparent criteria and, in case of several candidates with the same relevant skills, preference should be given to the underrepresented gender. The law also requires that appropriate information should be given to all candidates and the shareholders, setting out that in the case of a dispute with a candidate of the underrepresented gender before the courts, it is for the corporate entity to show that the choice of another candidate was justified.
The obligation to achieve balanced representation goes beyond corporate entities, and applies to entities considered to be of public interest i.e., those that have either more than 250 employees or a turnover of more than 50 million euros or assets amounting to a value greater than 43 million euros.
In addition to achieving balanced representation on their Boards, listed companies and those entities considered to be of public interest must ensure the same balanced representation exists within the management team of the entity. If this is not the case, the entity should explain why the imbalance exists and what measures are being taken to correct that situation. Furthermore, listed companies will need to include information regarding gender parity in their annual their sustainability reports, and will have an obligation to ensure that information about the representation of men and women on their Board is easily accessible on their website. This information should also be sent to the Spanish Stock Exchange where an annual report is prepared listing all companies that comply with the law.
Listed companies belonging to the IBEX 35 must comply with the Act by 30 June 2026, and those remaining listed companies not included in the index and not listed entities of public interest must comply by by 30 June 2027. A lack of compliance with the Parity Act will be considered a serious infringement.
