Objectives of the legislative proposal
The legislative proposal aims to create a more balanced ratio between the number of men and women at the top of large companies. Despite the intention of employers and their shareholders to improve the men-women ratio at the top, the results are disappointing. Therefore, the government is forced to take serious measures. These measures, an ingrowth quota and a target scheme, are explained in more detail below.
1. Ingrowth quota
The legislative proposal introduces a new Section 2:142b of the Dutch Civil Code (DCC) which stipulates a so-called ingrowth quota for supervisory boards of listed companies. The composition of the supervisory board is considered balanced if it consists of at least one third men and at least one third women. The ingrowth quota provides that as long as the composition of the supervisory board is not balanced, an individual cannot be appointed as supervisory board member, if such person does not contribute to a balanced composition. The ingrowth quota applies to new appointments. It does not apply to reappointments to the extent that the reappointment takes place within eight years after the year of the first appointment.
A resolution to appoint an individual who does not contribute to a balanced composition of the supervisory board, is contrary to the law and therefore null and void pursuant to Section 2:14 paragraph 1 DCC. The same applies to the appointment of non-executive directors within a one tier board model. Nevertheless, a null and void appointment resolution will not affect the validity of resolutions taken by the null and void appointed supervisory board member. This way, the position of third parties is protected.
The ingrowth quota shall be applicable to all Dutch listed public and private limited liability companies, regardless of whether they are a statutory two-tier board company.
2. Target scheme
The legislative proposal introduces a new Section 2:166 DCC (for public companies) and a new Section 2:276 DCC (for private limited liability companies), which both contain an obligation for large companies to set ‘appropriate’ and ‘ambitious’ objectives in the form of a target to create a more balanced ratio between the number of men and women in the management board, the supervisory board and the sub-top. For the definition of ‘large companies’, the definition in the annual accounts law is used and reference is made to Section 2:397 paragraph 1 and 2 DCC. The term ‘appropriate’ means that the target depends on the size of the management board, the supervisory board and the sub-top and on the existing ratio between the number of men and women. The term ‘ambitious’ means that the target should aim to make the composition more balanced than the existing composition. Large companies will also be required to draw up a plan to achieve the targets set and to report on these targets to the Social and Economic Council (SER), in addition to reporting in the management report. A format for reporting to the SER will be developed.
The Act will be evaluated after five years and contains a time limit. The ingrowth quota and the target scheme will lapse eight years after the Act becomes effective. The intended date on which the Act will enter into force is not yet announced.