Hey Compliance Warriors!
The state of Washington is taking action against gender inequality. It may take a little time to implement, but the results will be well worth it. For more information on the implementation strategy, Read on…
Article Via: shearman.com
“Pursuant to the recently-amended Washington Business Corporation Act (WBCA), effective June 11, 2020, corporations subject to the WBCA that are public companies[1] will be required to either have a “gender-diverse board” by January 1, 2022 or comply with new board diversity disclosure requirements. The law considers a board to be gender diverse if, for at least 270 days of the fiscal year preceding a public company’s annual meeting of shareholders, the board is comprised of at least 25% of individuals who self-identify as women.
If a public company’s board is not sufficiently diverse by January 1, 2022, it must disclose in its annual proxy statement to shareholders or post on the company’s primary website a “board diversity discussion and analysis” that includes information regarding the company’s approach to developing and maintaining board diversity. The board diversity discussion and analysis must include, among other things, a discussion of:
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- how the board (or an appropriate committee) considered the representation of diverse groups when identifying and nominating board candidates, or the reasons that diversity was not considered;
- any policies adopted to identify and nominate members of any diverse groups as board candidates, or the reasons for not adopting such a policy; and
- mechanisms to refresh the board, such as term limits or mandatory retirement of board members.
A public company will be exempt from the new board diversity requirements if: (1) it is an emerging growth company or a smaller reporting company, (2) more than 50 percent of the shares representing the voting power of the company are held by one person or group, (3) the company’s articles of incorporation authorize the election of all or a specific number of directors by one or more separate voting groups, or (4) the WBCA or federal law does not require the company to hold an annual shareholders meeting.
If a public company fails to provide a diversity discussion and analysis in accordance with the WBCA, any voting shareholder may seek a superior court order requiring the company to provide the information to shareholders.
Washington’s bill follows similar legislation passed in California in 2018 requiring each publicly-traded company with its principal executive offices located in California to have at least one woman on its board of directors by the end of 2019. In March 2020, the California Secretary of State reported on the status of corporate compliance with California’s board diversity statute. Of the 625 publicly traded corporations that identified principal executive offices in California in their 2019 Form 10-Ks, 330 have filed the required board diversity disclosure. Of those 330, 282 companies reported that they were in compliance with California’s board gender diversity mandate.
A number of states, including Hawaii, Massachusetts, Michigan, and New Jersey, have considered legislation similar to California’s legislation. Other states, like Illinois and Maryland, have enacted board diversity reporting requirements, while others have mandated board diversity studies. For example, New York’s “Women on Corporate Boards Study” law, enacted earlier this year, mandates a study on the number of female directors on the boards of companies incorporated in New York or authorized to conduct business in New York.”
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