On 28 September 2021, the Dutch Senate passed a new diversity quota and targets law that will become applicable from 1 January 2022. The new measures, which will be included in Book 2 of the Dutch Civil Code (on legal entities), aim to create a gender-balanced composition of boards.
To companies listed on the Amsterdam Euronext stock exchange, a growth quota will apply for supervisory boards: the boards should consist of at least one-third men and one-third women.
An appointment of a person not resulting in a more balanced composition of the board shall be null and void, in case the company has not yet reached its quota. The same rules apply to the appointment of non-executive directors in listed companies with a one-tier board.
The rules apply to new appointments but not to the reappointment of current board members within eight years of the initial appointment or when the appointment serves the long-term interests or sustainability of the company or ensures its viability.
In addition, all large (as defined in statute) public companies (NV’s) and private limited companies (BV’s) must set appropriate and ambitious gender-balance targets for the management board, supervisory board, and senior management.
“Appropriate” means the targets should match the size of the boards and senior management and the existing balance between men and women. The target should be “ambitious” in the sense that a more gender-balanced composition of the boards and senior management should be fostered than the existing one. The company must set up a concrete plan implementing the set targets and be transparent about the process of following the plan.
The Dutch Social an Economic Council (SER), an advisory body to the Dutch government, is developing a support infrastructure to steer and monitor companies in reaching their targets. The infrastructure – including a diversity portal for processing and publishing the required information – will serve as an adequate monitoring system where companies report their progress on the targets and can mirror others.
Companies will have to report annually – within ten months from the financial year – to the SER on the progress made. They must report the total number of men and women at boards and senior management level at the end of the financial year, the annual targets, and the plan for how to achieve these targets. If a company does not meet its targets, it will have to explain why and indicate how this will be addressed.
Listed companies on the Amsterdam stock exchange are exempt from applying the gender balance targets to their supervisory board (or non-executive directors), because they fall under the scope of the gender diversity quota.
These companies do have to set targets for management board (or executive directors) and senior management. Large group companies are exempt if the parent company complies with the rules of gender balance targets, also on their behalf.
Companies must include information on the quota and targets in their management report. To this extend, an amendment of the statutory reporting requirements is envisaged.
Evaluating the Act
The act will be evaluated after five years, so before the end of 2026. After eight years, at the end of 2029, the growth quota must have been reached and the target rules will expire. The ratio of man and women at the top should then be “balanced”.