A bill introducing a quota for the supervisory boards of Dutch Amsterdam-listed companies and setting gender balance targets for board and senior management level of "large" listed and non-listed Dutch NVs and BVs has been passed by both houses of parliament. In the event of non-compliance with the one-third quota, new appointments will be declared null and void. The company's gender balance targets will have to be reported to the Dutch Social and Economic Council (SER) annually and be included in the management report for transparency purposes.
Gender diversity quota
Once the bill enters into force, Amsterdam-listed Dutch NVs and BVs will have to comply with a quota of at least one-third for both women and men on their supervisory boards. For companies with a one-tier board, this implies that at least one-third of the non-executive directors must be women and at least one-third must be men. In this article, when we refer to the supervisory board and to supervisory directors, this includes one-tier boards and non-executive directors.
Scope and key issues
The quota provisions apply to Dutch NVs and BVs with shares or depositary receipts listed on Euronext Amsterdam.
A new appointment that does not contribute to the gender balance will be declared invalid (null and void) if the company has not yet met the one-third quota. Nevertheless, even if an appointment turns out to be invalid, the legal validity of decisions taken by that director will not be impacted.
Some exemptions apply in the context of the one-third quota provision:
- This gender quota does not apply to the reappointment of a supervisory director, provided that the reappointment occurs within eight years after the year of the director’s first appointment.
- An appointment or reappointment that does not contribute to the gender balance will be allowed under "exceptional circumstances" as defined in article 2:135a (5) of the Dutch Civil Code. These may only be invoked if the appointment serves the long-term interests and sustainability of the company or ensures its viability. For example, if a significant number of the supervisory or non-executive directors resign unexpectedly or if a company in distress urgently needs to appoint a new supervisory director, but does not have the time or resources to search extensively for a suitable candidate. An appointment under exceptional circumstances is limited to a maximum period of two years.
- This gender quota does not apply to the temporary appointment of a supervisory director by the Enterprise Chamber of the Amsterdam Court of Appeal as part of inquiry proceedings. This temporary director does not count when calculating a board's composition.
Gender balance targets for "large" NVs and BVs
The bill's second measure to improve gender diversity at Dutch companies is the requirement to set appropriate and ambitious gender balance targets for the management board, supervisory board and senior management levels. For companies with a one-tier board, these targets have to be set for the board as a whole.
Scope and key issues
All "large" NVs and BVs, whether listed on Euronext Amsterdam or abroad, (and thus also including non-listed NVs and BVs), will have to set appropriate and ambitious gender balance targets. An NV or BV qualifies as "large" if it meets at least two of these criteria:
- a balance sheet total in excess of EUR 20 million;
- a net turnover of more than EUR 40 million; and
- an average number of 250 or more employees during the financial year.
When setting gender balance targets, companies have to choose for "appropriate and ambitious" targets which give them the possibility of developing tailor-made solutions. An "appropriate" target figure depends on the size of the management board, supervisory board and senior management on the one hand, and on the existing balance between men and women within the company on the other hand. An "ambitious" target figure is aimed at fostering a more gender-balanced composition of boards. If the company has not achieved its targets, it has to provide an explanation for this and explain what it will do in the future to achieve the targets. The appointment as such will remain valid.
The following exemptions apply to the measures on gender balance targets:
- Supervisory boards and non-executive directors of Amsterdam-listed "large" NVs and BVs are exempted as these fall under the scope of the gender diversity quota. These companies still have to set targets for their management board, executive directors and senior management.
- "Large" group companies are also exempted, but only if their parent company complies with the measures on gender balance targets, also on their behalf.
"Large" companies must make a plan which outlines the actions needed to meet the gender balance targets. They are also required to report annually, within ten months after the end of the financial year, to the SER:
- the total number of men and women at board and senior management level; and
- the annual targets and how to achieve these.
If they have not met the targets, companies will also have to explain why, and specify how this will be remedied.
Companies must also include this information in their management report. The SER will look further into whether companies can deliver the required information to the SER via a fixed format, to ease the administrative burden. The SER, in collaboration with the Dutch business sector, is also setting up a diversity portal for processing and publishing the required information. The SER will provide companies with further details in the coming months.
The reporting requirements apply to the financial year starting on or after 1 January of the year the bill entered into force. So if the bill enters into force on 1 January 2022, "large" companies have to monitor their gender balance targets and the progress made during the 2022 financial year. In 2023 they will account for this in their management report and to the SER.
Entry into force, evaluation and sunset clause
The bill is expected to enter into force on 1 January 2022. The gender diversity quota will apply to new appointments after that date. The gender balance targets also have to be set as of that date and have to be accounted for in the management report for the 2022 financial year and in the information issued to the SER. The bill will be evaluated five years after taking effect, and it will lapse after eight years.
When a new bill takes effect, this can always give rise to questions. We answer a few potential ones about the gender diversity measures:
How do you determine the number of men and women for the supervisory board when applying the one-third quota rule?
The bill provides clear guidance on getting to the right number of men and women on the supervisory board when applying the gender quota. If the total number cannot be divided by three, the total is rounded up to a number that can be divided by three. For example, a supervisory board of four members should be rounded-up to six and at least consist of two women and two men.
If a group includes more than one "large" company, must each "large" company set its own gender balance targets?
"Large" NVs and BVs have to set appropriate and ambitious gender balance targets for the board and senior management levels. “Large” group companies are exempted from these obligations, but only if their parent company complies with the obligations set out in the bill, also on their behalf. It is up to the parent company to determine if the targets are suitable to all group companies or if multiple targets set by each large company in the group separately are needed.