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European Commissioner for Justice, Fundamental Rights and Citizenship Viviane Reding, who has been championing the scheme to force all publicly traded companies to have 40 per cent of their board seats filled by women by 2020 or face sanctions and fines, addresses the media at the European Commission headquarters in Brussels, March 5, 2012.

Yves Logghe/AP

The European Union's justice commissioner has been forced to withdraw a controversial plan to impose a Europe-wide quota for women on supervisory boards after the proposal was deemed to lack the legal basis to be pushed forward.

Viviane Reding, who has been championing the scheme to force all publicly traded companies to have 40 per cent of their board seats filled by women by 2020 or face sanctions and fines, has been asked to present a watered-down version of the proposal, according to people familiar with the matter. The revised plan will be presented on Nov. 14.

Failure to get the proposal through on Tuesday follows a months-long but futile effort to win support from others on the 26-member European Commission and growing opposition from member states – headed by Britain – who are against Brussels' involvement on a matter many argue should be dealt with at a national level.

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Under the new plan, the 40-per-cent quota will be an objective for companies to meet, not a legally binding obligation, said a person with knowledge of the debate within the the EU's closed door meeting.

Another key alteration to the current proposal will be that Brussels will not be in a position to set sanctions for companies that fail to boost the number of females on non-executive boards.

National governments will be granted greater freedom to decide whether or not they want to impose sanctions on companies that have shown little or no progress towards increasing the number of women on boards.

An EU official said that greater attention will be given towards companies' selection procedures for board members, with an aim to make the process fairer. However, the principle that women would be given priority over an equally qualified male candidate for a board seat – a key measure according to people in favour of quotas – was removed from the proposal.

Several EU commissioners expressed their opposition to the proposal and complained that Ms. Reding's plan was not lawful.

"This is the wrong fight at the wrong time," said an EU commissioner opposed to Ms. Reding's proposal. "We could shape the national debates by putting a clear European model on the table – but we don't need to force it down member states' throats, or prematurely kill the ongoing debates at national level."

Deborah Warburton, partner at United Kingdom consultancy Hedley May, said that blocking the decision would have been the best response but watering down the plan is the most realistic outcome.

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"What is needed is meaningful and lasting change on the part of large organizations to improve women's career prospects thereby creating a sustainable pipeline of female talent," Ms. Warburton said.

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