Dutch Senate adopts new Bill to improve gender diversity on corporate boards in the Netherlands
On 28 September 2021, the Dutch Senate adopted the ‘Bill on Gender Balance in Management and Supervisory Boards’, which is expected to enter into force on 1 January 2022. The legislation distinguishes listed companies and so-called large companies: for the approximately 100 listed companies in the Netherlands, an appointment quota will apply. For the approximately 5,000 large companies in the Netherlands, a target figure will apply. Both will be briefly explained below.
Listed companies will have to comply with a quota of at least one-third for both female and male members of supervisory boards. In respect of companies with a one-tier board, the quota applies to one-third of the non-executive directors. So long as at least one third of the members of the supervisory board are not women, the general rule is that no male supervisory board member can be appointed (and vice versa). If the person appointed does not contribute to a balanced composition, this will result in an invalid (null and void) appointment. An invalid appointment will however not affect the legal validity of adopted resolutions.
Large companies are required to set appropriate and ambitious targets in the form of quantitative objectives in order to improve the gender balance in management and supervisory boards and in senior management positions. For companies with a one-tier board, the targets are to be set for the board as a whole. Large companies should also make concrete plans for implementing the targets and be transparent about the process involved. For example, this concerns the drafting or amending of a profile and the setting up of a transparent recruitment and selection process. If the company does not achieve its targets in a certain financial year, it will be required to provide an explanation for not having achieved these targets and explain what it will do in the future to achieve the targets. The appointment as such will however, remain valid.
The Dutch Social and Economic Council (“SER”) will develop a diversity portal in which the large companies are obliged to participate. With this portal, it will be possible to monitor whether and to what extent these companies comply with the target figures. In addition, large companies can benchmark their progress against other large companies. The SER will provide further details in the coming months.
Works council participation
Currently, section 28 (3) of the Dutch Works Council Act already grants the works council a role in countering discrimination in general and in promoting equal treatment of men and women. As a result of this new legislation, the role of the works council in striving for a gender balance may become even more significant, now that the formulation of objectives may be subject to the works council's right of consent, for instance on the basis of section 27 (1) (e) of the Works Council Act.
The new legislation will be reviewed after five years and has a fixed expiry date: eight years after its entry into force, the growth quota and target regulation will expire. Should a continuation prove to be required (whether or not in an amended form), there will be sufficient time after the review to go through a legislative process to that end.