On 28 September 2021, the Dutch Senate approved a bill for a balanced male/female representation in the boards of companies. This bill consists of two separate schemes aimed at increasing diversity in the top management of companies. The bill enters into force on 1 January 2022.
Target figures scheme
Diversity in the top management of companies has been a much-debated topic for many years. Until 1 January 2020, a scheme of target figures applied to large public limited companies and private companies (in Dutch: “NV” and “BV”). Under this scheme, large companies were obliged to strive for having their boards of directors and supervisory boards consist of at least 30% women and at least 30% men. The ‘apply or explain’ principle was used: if the stive numbers were not met, the board would be obliged to explain in its directors’ report why it had not been met, and which measures would be taken to ensure that it would be met in the future.
Bill for a balanced male/female representation in the boards of companies
Diversity quota for listed companies
The bill provides that the composition of supervisory boards and non-executive directors of Dutch listed companies (both BVs and NVs), listed at the Euronext Amsterdam stock exchange, shall be at least one-third male and one-third female. This quota will apply to all new appointments of supervisory directors. As long as a supervisory board is not at least one-third male and one-third female, any appointment that does not create more balance to the composition will be null and void. The vacancy will then remain open. Incidentally, the nullity of the appointment will not affect the legal validity of the decision-making process in which the board members have participated.
Appropriate and ambitious target figures
The bill makes it mandatory for large NVs and BVs to set ‘appropriate and ambitious’ target figures to improve male/female ratios within boards, supervisory boards and ‘senior management’. Each company has to decide for itself for which category of senior management it will set a target figure. The Explanatory Memorandum with the bill refers to categories of employees in management positions, such as the executive committee or (first-tier and second-tier) senior management positions.
The term ‘appropriate’ refers to the fact that the target figure depends on the size of the board, the supervisory board and ‘senior management’, and of the existing male/female ratio within the company. The term ‘ambitious’ implies that the target figure should be aimed at a composition that is more balanced than the current composition. Therefore, the target figure cannot be zero.
A BV or NV is a large company if it meets at least two of the following three criteria:
- The value of its assets according to the balance sheet is more than EUR 20 million;
- The net turnover for the financial year is more than EUR 40 million;
- The average number of employees during the financial year is 250 or more.
The company has to prepare a plan to reach its self-determined targets. There is no penalty on failing to achieve the appropriate and ambitious target figures. However, the company must inform the Social and Economic Council (“SER”) each year within ten months after the end of the financial year of the numbers of men and women within the company’s board, supervisory board and ‘senior management’. The company must also be transparent about its targets by reporting a target figure, the plan for achieving these targets, and the extent to which the targets set in the previous financial year have been achieved. If one of the targets has not been achieved, the reasons for this should also be stated.
Period between 1 January 2020 and entry into force of new law
The legislator has not provided temporary legislation for the period between 1 January 2020 and the entry into effect of the new law. Nevertheless, companies would do wise to start paying attention to diversity within the board already, and to take into account the requirements of the bill, in anticipation of the new law and in view of the current interest in this topic in politics and the public debate. Besides, listed companies should carefully consider which supervisory director to appoint next, in order to prevent that the appointment will be nullified.
Would you like to learn more about this bill? Please feel free to contact Ginou van den Berg or Lisa Klumperink.
