On September 28, 2021, the Dutch senate approved a bill aimed at creating a more balanced ratio between woman and men in management and supervisory boards. The bill replaces the statutory target regulation of Article 2:166/267 Dutch Civil Code for large NVs and BVs, which expired on January 1, 2020. This “comply or explain” provision made insufficient progress, according to (among others) advice from the Social and Economic Council (Dutch: SER), in the growth of women in top positions. That is why the SER advocated for, among other things, firm measures and an integral approach to increasing gender diversity. This bill is the result.

The specific goal of the new act is to balance the ratio of men to women at the top of large companies. Although a mandatory target is a heavy and exceptional measure, lawmakers considered it necessary to achieve improvement. The act is aimed at large public and private companies, as well as publicly traded companies, and will impact shareholders, directors, commissioners and employees. As the legislative process was completed in November, the bill will take effect on January 1, 2022.

Content of Bill

First, the bill includes an ingrowth quota of at least one-third male and one-third female for the supervisory boards of Dutch listed companies with a listing in the Netherlands. Any appointment (of a supervisory director) after January 1, 2022 that does not make the gender ratio within the supervisory board more balanced, is null and void.

Exceptions apply to a supervisory board or one-tier board consisting of one person, reappointments within eight years from the year of appointment, appointments in the event of exceptional circumstances, such as when a large part of a supervisory board resigns unexpectedly, or in the case of temporary appointments by the Enterprise Chamber during an inquiry procedure.

Target

In addition, “large” NVs and BVs are required to set their own “appropriate and ambitious” targets for promoting gender diversity within the management board, the supervisory board and among categories of employees in managerial positions (e.g. senior management positions), to be determined by the company itself. According to the bill, “appropriate and ambitious” means that the size of the board and the existing proportions must be taken into account and the target should be aimed at making the existing situation more balanced.

An NV or BV qualifies as “large” if its annual accounts meet at least two of the following three characteristics for two consecutive years:

1. A balance sheet total larger than €20 million
2. Net turnover larger than €40 million
3. The average number of employees over the financial year is 250 or more.

Specifically, a “large” company must meet two obligations:

• Have a plan devised to achieve the set target. The explanatory memorandum to the bill states that this plan may include, for example, the setting up of a profile which provides a framework for the appointment of the members of the (supervisory) board and certain management positions, setting up a transparent recruitment and selection process and a (possible) preference policy. If there is room for even more balanced proportions, such as with a board consisting of four people and the plan sets a target of one woman, the company will have to reconsider what target is “appropriate and ambitious” once that target has been reached.
• Annually, the company must report to the SER on progress within 10 months from the end of the fiscal year: they must report the number of men and women in (sub)top positions, the plan for reaching the target and the extent to which the goals set in the previous financial year have been achieved—and if one or more goals have not been achieved—the reasons. This report is also part of the management report. The SER will monitor progress and whether companies are complying with the obligations and will publish the results.

Group companies are exempt from these obligations so long as the holding company is compliant.

Practical importance for large companies

The law means in practice that, as of January 1, 2022, listed companies will have to pay close attention to whom they appoint as new supervisory board members. If, for example, a supervisory board consists of two women and two men, the departure of one woman will have to be compensated for by another woman. On the other hand, the departure of a male supervisory director must also be compensated for by a man. The appointment of a person who does not contribute to a more balanced gender ratio in the supervisory board is null and void.

In addition, as of January 1, 2022, “large” companies will have to set appropriate and ambitious targets and launch an action plan to achieve them. Beginning the year following the law’s entry into force (expected to be 2023), these companies will then report to the SER; the management report will cover the targets and results beginning with the year this law enters into force.

Evaluation and expiration of the law

The law will be evaluated after five years, i.e. in 2027. It will automatically expire after eight years. Thus, if the law is not renewed, it expires on January 1, 2030.

Conclusion

From January 1, 2022, many companies will newly be obliged to set targets for improving gender diversity in management. It is critical to stay current on which obligations are relevant for your company. Please feel free to reach out if you have any questions about the Gender Balance in Management and Supervisory Boards Act, or if we can assist you in setting an “appropriate and ambitious” target for your company.