In context

Board gender diversity proposals up for consultation in the Netherlands

May 19, 2020
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In context

A draft bill introducing stricter gender diversity measures for Dutch listed companies and “large” listed and non-listed NVs and BVs is open for consultation. As expected, the draft bill is in line with the 2019 advisory report by the Dutch Social and Economic Council (SER). Dutch listed companies must comply with a quota of at least one-third for both women and men on supervisory and one-tier boards. New appointments which do not contribute to a gender-balanced supervisory or one-tier board will be void. A second element of the draft bill is that all “large” Dutch NVs and BVs – whether listed or unlisted – will have to set ambitious gender balance targets for their boards and senior management. Additionally, they will have to be transparent and account for achieving these targets in their annual reporting. The SER will also monitor progress towards meeting the self-imposed targets.

 

We will keep you informed as the bill makes its way through the drafting and parliamentary stages.corp

Gender balancing process so far

A temporary statutory target in Dutch law – 30% representation for both men and women on boards at “large” NVs and BVs – expired on 1 January 2020. This gender diversity rule formed part of a “comply or explain” approach for companies. With no legal sanctions applying, the approach proved to have little effect. In September 2019, the SER issued an advisory report on gender and cultural diversity in the board room.  It called for stricter measures to enhance gender diversity at the supervisory board level of listed companies and for maintaining the 30% target numbers at “large” companies. These measures aim to improve the number of women moving up the career ladder and to accelerate the pace of growth in women’s representation on boards. In February 2020, the Dutch government responded to the SER’s report indicating its intention to adopt the SER recommendations in their entirety.

 

The consultation period ran from 15 April until 14 May 2020. The draft bill also includes provisions regarding the modernisation of Dutch NV law. To read more about that part of the draft bill, see our In context article. De Brauw has also submitted feedback on the draft bill, which you can read here (only in Dutch).

 

Diversity quota for Amsterdam-listed Dutch NVs and BVs

In line with the SER’s report, the draft bill proposes a quota of at least one-third for both men and women on supervisory boards of Dutch NVs and BVs listed on Euronext Amsterdam. A more diverse supervisory board will purportedly lead to a more diverse – in terms of gender – management board, as the supervisory board selects and nominates future managing directors. Companies that don’t meet the statutory quota and appoint a new supervisory director of the overrepresented gender, will see that appointment become void. Nevertheless, even if an appointment turns out to be void, this does not impact the legal validity of decisions taken by that director.

 

The quota does not apply to the reappointment of a board member. The rationale for this is that an experienced and well-functioning director should be allowed to be reappointed and shouldn’t be replaced in an effort to create a balanced board.

 

The proposed provisions include specific rules in arriving at the right number of female and male supervisory directors when applying the quota. When the total number of supervisory directors cannot be divided by three, that total is rounded up to a number that can be divided by 3. So where, for example, the supervisory board has four members, there should be two female directors and two male directors, based on a rounded-up total of six.

 

The SER’s report defined “listed companies” as Dutch NVs and BVs listed on a stock exchange, irrespective of whether that exchange is located in the Netherlands or abroad. The draft bill limits the statutory quota for diversity to Dutch NVs and BVs with a listing on Euronext Amsterdam only. The reason for this is that Amsterdam-listed companies have been at the centre of the public debate in the Netherlands about introducing this quota. The gender balance targets mentioned below, however, apply to all large Dutch NVs and BVs, irrespective of their nexus to the Netherlands.

 

One-tier companies

The quota also applies to companies with a one-tier board structure and extends to executive as well as non-executive directors. This goes further than the supervisory board quota proposed for two-tier companies and deviates from the SER’s recommendations, which only refer to non-executive board members. We will keep you informed on how the text of the bill progresses in this respect.

 

Gender balance targets for “large” NVs and BVs

Another measure to improve gender diversity is the requirement for all listed and non-listed “large” Dutch NVs and BVs to set appropriate and ambitious gender balance targets, at the board and senior management levels. By setting targets for senior management, companies can expand their talent pool of board-ready women. The targets have to be set annually.

 

An NV or BV qualifies as “large” if it meets at least two of these criteria:

  • The value of the assets – as included in the balance sheet with explanatory notes – exceeds EUR 20 million
  • The net turnover for the financial year exceeds EUR 40 million
  • There are, on average, 250 or more employees at the company during the financial year

 

The targets have to be “appropriate and ambitious”. This does justice to the differences between companies, and it facilitates tailor-made solutions as well. An appropriate target figure depends on the size of the management board, supervisory board and senior management on the one hand, and the existing balance between men and women of a company on the other hand. An ambitious target figure is aimed at fostering a more gender-balanced composition of boards. Following the draft bill’s explanatory notes, an appropriate and ambitious target figure generally means that at least one woman has to be appointed to an all-male board.

 

According to the proposed provisions, “large” companies must make a plan which outlines the actions needed to meet the targets. They will also have to report to the SER on the total number of men and women at board and senior management level, and on the annual targets and how to achieve these. The reporting deadline is ten months after the end of each financial year. Companies which have not met the targets will have to explain why, and how, this will be remedied. Companies must also include this information in their management report. The SER recently stated that the Dutch foundation Topvrouwen.nl will play an important role in supporting the SER in the process of enhancing board diversity and inclusion at companies.

 

“Large” listed companies

If a “large” Dutch company is listed in the Netherlands, the targets do not apply to the supervisory directors, as they are already covered by the statutory one-third quota for Amsterdam-listed Dutch NVs and BVs (see above).

 

Sunset clause, evaluation and entry into force

The provisions on gender diversity will lapse after eight years, and will be evaluated five years after taking effect. The requirements take effect in the financial year which starts on or after the date when they enter into force.

 

Cultural diversity barometer

The SER’s advisory report also recommended that measures be taken to enhance cultural diversity at companies’ top levels of management, including the introduction of a “cultural diversity barometer”. The Minister of Social Affairs and Employment recently notified the lower house of the Dutch parliament that, as of 1 July 2020, organisations with at least 250 employees will be able to use this barometer to gain more insight into their cultural diversity. Organisations can approach Statistics Netherlands (CBS) for data on the make-up of their work force. The relevant information will refer to groups of employees, rather than individuals, to prevent infringing privacy law. No data will be shared that can be traced to individual employees.

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