The application of the Law on gender parity representation and balanced presence of women and men in companies

The application in companies of the provisions contained in the Organic Law 2/2024 on gender parity representation and a balanced presence of women and men raises various reflections and questions. The role of the interpreter will again be required, with a greater intensity than desirable, to clarify the meaning and scope of the legislative mandates. The Law modifies electoral regulations and those applicable to Constitutional bodies and bodies of Constitutional relevance (surprisingly not including the Economic and Social Council), as well as the Government and the public sector in general. It also affects other institutions (professional associations, public radio and television, trade unions and business associations, university student councils, foundations, third-sector organizations, and social economy organizations). However, it will undoubtedly have a particular impact on companies, and in relation to the rules applicable to them, some of the most relevant interpretative doubts arise.

Chapter V of the Law transposes Directive (EU) 2022/2381 of the European Parliament and of the Council, of November 23, 2022, on improving the gender balance among directors of listed companies and related measures. The first thing that stands out is that, once again, the Spanish legislator does not limit itself to transposing the directives' mandates but significantly extends them. It seems that European regulations are never enough and that Spanish companies must bear additional social demands compared to their European competitors. It is unclear what drives our legislators to systematically increase the already considerable demands of European legislation for our companies. A key example is the different scope of application: while the Directive applies exclusively to listed companies (as expressly acknowledged in the Preamble of the Law), explicitly excluding micro-enterprises and SMEs (even if listed), the Spanish law applies not only to listed companies but also to public interest entities that are not micro-enterprises or SMEs (in the terms of the EU Directive, i.e., those employing more than 250 workers, with a turnover of more than 50 million euros or a total balance sheet exceeding 43 million euros).

On the other hand, the Directive offers two alternatives to ensure "gender balance in Boards of Directors": either that members of the underrepresented sex hold at least 40% of the non-executive director positions, or that they occupy at least 33% of the total director positions, including both executive and non-executive roles. The Spanish legislator disregards this alternative and the distinction between executive and non-executive directors, directly requiring that at least 40% of the Board of Directors be composed of members of the underrepresented sex.

Furthermore, the Law imposes on listed companies (and the public interest entities mentioned) the duty to "ensure" that senior management has a composition with at least 40% of members of the underrepresented sex. However, in this case, the "comply or explain" principle applies, meaning that if the percentage is not met, companies must provide an explanation of the reasons and the measures adopted to achieve the percentage "in the next financial year and successive ones." The reference to "senior management" is also absent from the Directive, raising significant interpretative doubts. It could be understood that this refers to senior management contracts, affecting only the aforementioned personnel. However, the legislator does not explicitly mention this, which exacerbates interpretative doubts.

This seems to be what the wording of the preamble of the Law seems to lead to: "the central role that may be played by senior management positions that do not have the status of members of the board of directors should not be forgotten"; "for this reason, a principle of balanced presence in such senior management positions is also established". Certainly, the legislator could have referred to senior management contracts, to avoid interpretative doubts, but in any case it seems clear that he is referring to senior managers (senior management personnel) who do not form part of the Board of Directors (the preamble refers, incorrectly, to "posts" that do not have the character of Board Members, but Board Members are the managers, not the posts). That is, if Senior Managers are Directors, they are affected by the parity rule in the composition of the Board. And this parity rule also applies (on a comply-or-explain basis) to all senior management not on the board.

The first transitional provision, section 5, further complicates matters, as it does not specify whether the gender parity rule applies solely to the Board of Directors or also to other governing bodies.

Note that it does not say, as in section 8 of the new article 529 bis of the new Capital Companies Act, "Senior Management". If it were to say "the Boards of Directors and Senior Management", there would be no interpretative doubts. But by deleting the particle "the", grammatically speaking, it can be understood as referring to the Boards of Directors and Senior Management. The rest of the provision contributes to this, when it refers to the percentages "in these bodies". Obviously, a body is a Board of Directors, but Senior Management, or Top Management, does not in itself constitute a body of any kind. All this gives grounds for arguing that the parity rule applies to Boards of Directors and other Boards or Management Bodies (a management committee, for example, whose members, moreover, need not be Senior Management staff), but would not affect Senior Management staff who are not members of the Board of Directors or other Management Bodies. Although this transitional provision refers exclusively to Public Interest Entities, it gives rise to interpretative doubt, fostered, moreover, by the fact that the legislator has not made explicit reference to Senior Management contracts (although in the preamble it does refer to senior management "posts"). It is also reinforced by the fact that the Directive does not contain any reference to Senior Management personnel.