On December 30, 2019, New York State enacted the "Women on Corporate Boards Study Act" (the "Act"), which requires the New York Department of State and the Department of Taxation and Finance to conduct a study on the number of female directors who serve on the board of directors of each corporation authorized to do business in New York. The Department of State must publish on its website a report of its findings by February 1, 2022, and every four years thereafter.
To inform the study, corporations authorized to do business in New York State are going to be required to report the number of female directors and the total number of directors on their boards to the Department of State.
Requirements of the Act
Effective as of June 27, 2020, Section 408 of New York's Business Corporation Law ("Section 408") will require that each corporation authorized to do business in New York file a Biennial Statement with the New York Department of State disclosing the total number of directors and the total number of female directors on its board.
The study prepared from this data and the Department of State's published report required by the Act will include:
- The number of women directors and the total number of directors that constitute the board of each corporation;
- An analysis of the change in board gender composition from prior years; and
- The aggregate percentage of women directors on all boards of directors.
Companies authorized to conduct business in New York – not just those companies incorporated in New York – should prepare to provide the required information regarding board composition.
To date, similar reporting requirements have been enacted in Illinois and Maryland. California has gone a step further, requiring each publicly held company with principal executive offices in California to have at least one woman on its board of directors. In addition to legislators, investors have also taken an interest in board diversity. Recently, for example, Goldman Sachs announced it will not take a company in the U.S. or Europe public unless it has at least one "diverse" board member.
The legislative and private ordering drumbeat regarding board diversity is getting louder, and companies should be reviewing their approach to board diversity in order to be ready to address the topic with shareholders and other constituents. We expect to see more and more companies reflecting a new or more nuanced discussion regarding board diversity in proxy statements this season. For a discussion of recent developments relating to board diversity, please see our client publication, "Turning Up the Volume of Board Diversity," which was included in our 17th Annual Corporate Governance & Executive Compensation Survey.
1 Prior to the Act, this Biennial Statement only required 1) the name and the business address of the company's chief executive officer, 2) the street address of the company's principal executive office, and 3) the address to which the New York Secretary of State should forward copies of process accepted on behalf of the company.
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