In September 2021, the Dutch Senate ratified the “Act to ensure a more balanced ratio between men and women on the management and supervisory boards of large public limited and private limited companies,” known as the Diversity Quota and Targets Act (in Dutch: Wet ingroeiquotum en streefcijfers) for short. The government’s position is that diversity in the workforce, especially on company boards, could improve decision-making and even boost results. The Act (click here, in Dutch language only) is expected to enter into force on January 1, 2022.

Large companies

The Diversity Quota and Targets Act will apply to listed and so-called “large” companies. These are companies whose financial statements meet at least two of the following criteria on two consecutive balance sheet dates:

1. the value of their assets is more than EUR 20 million;
2. their net revenue is more than EUR 40 million; and
3. they have an average of 250 or more employees.

Women’s quota

A diversity quota, or “women's quota,” will also apply to the composition of listed companies’ supervisory boards, which will then ultimately have to be at least one third male and one third female. Until this quota is reached, any appointment that does not contribute to achieving this balance will not be allowed—such appointment will be voided, with the vacancy remaining unfilled.

If the number of supervisory board members is not divisible by three, the next higher number that is divisible by three will be used to determine the ratio of men to women.

Targets

The Diversity Quota and Targets Act will also require all large companies to set "appropriate and ambitious goals in the form of targets" to achieve a better balance between men and women on their management and supervisory boards as well as in senior management positions. If a company’s management board and supervisory board consist of just one individual, then that company will be able to set a joint target for both boards. It will then have to draw up a plan of action in that regard.

Within ten months after the end of every financial year, every company subject to the Act will have to report the following to the Social and Economic Council of the Netherlands (SER): (i) the number of men and women who were on its management board and supervisory board as well as in senior positions at the end of the financial year; (ii) its targets; and (iii) its plan of action. Any company that has not met any of these targets will then have to provide an explanation.

Survey by the Social and Economic Council

The SER recently conducted a survey among over 5,000 of the largest companies and approximately 100 listed companies that will be subject to the Diversity Quota and Targets Act. It showed that although 80% of the companies knew about the women's quota for supervisory boards, only about half of them were aware of the targets requirement. As a result, not even one in five companies had started making any preparations for it.

The SER is going to support companies’ efforts in achieving their quota and targets under the Diversity Quota and Targets Act. According to the SER’s chair Mariëtte Hamer, "There is a database available that is full of women with board experience. The SER is building a diversity portal, which is an open website that publishes companies’ targets and plans of action. It also shares knowledge and makes tools available for achieving greater diversity."

Annual publication

The SER will publish the data reported by every company at a fixed time every year. Since both diversity and inclusion are playing an increasingly prominent role in the business world, with potential clients and applicants also factoring them into their company choices, listed companies and large companies would do well to actively work towards achieving their women's quota and diversity targets.

The full SER survey (in Dutch language) can be viewed via this link.