CMVM, the Portuguese securities market regulator, will be responsible for enforcing the rules once Portugal’s government has revised the law on gender balance at listed companies. The move adds a formal sanctions regime to board diversity rules already in force, according to ECO News.

The current law has been in force since 2017 to ensure that at least 33.3 percent of members of management and supervisory bodies are held by the underrepresented sex.

Stricter selection procedures

Under the draft sent to parliament, companies listed on the stock exchange which fail to meet the minimum 33.3 percent threshold for the underrepresented sex will have to follow stricter selection procedures for new appointments.

Companies will be obligated to use pre-defined criteria, such as aptitude, competence and professional performance, with metrics that are clear, objective, neutral and applied without discrimination.

Equal candidates

If candidates show equal qualifications, preference should be given to the underrepresented sex, according to ECO News. Only in the case of legally weighty reasons will a company be allowed to choose another candidate.

Should a listed company fail to comply with these rules, it could be subject to fines ranging from €12,500 to €2.5 million under Portugal’s securities code.

Penalty revenue

The proposal requires new annual reporting duties for all listed companies, which will have to disclose to CMVM the number and percentage of women and men in leadership positions. If the 33.3 percent threshold has not been reached where applicable, they are required to explain why and set out measures taken to correct it. Failure to submit or publish such reports could trigger fines between €5,000 and €1 million.

The draft also changes how penalty revenue is distributed, with all proceeds from the new fines going entirely to the state budget. Currently, it is split between the Commission for Citizenship and Gender Equality, CMVM and the state.