New rules on gender quotas in boards of directors etc.

Date 17 dec. 2012
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14 December 2012, the Danish Parliament adopted an amendment of, among other things, the Danish Companies Act, the Danish Financial Statements Act and the Danish Act on Gender Equality with the joint purpose of creating a more equal distribution of women and men in the managements of the approximately 1,100 largest Danish companies.


Henceforth, the companies affected must set targets for the quota of the underrepresented gender in the supreme management body. Additionally, the companies affected must prepare a policy for increasing the quota of the underrepresented gender at the other levels of management.


The Companies are ordered to report on both targets and policies annually, and companies may be fined should they fail to act or report in accordance with the rules.


The law comes into effect 1 April 2013, and the changes to the Danish Financial Statements Act on reporting are effective as of the financial year beginning 1 January 2013.

 


Companies covered

As a starting point, the rules will cover the following types of companies etc.:


  • Listed companies
  • Companies, businesses, foundations etc., who have debt instruments or other types of securities listed for trade on a regulated market in an EU/EEA country
  • Large public and private limited companies and limited partnership companies
  • Large partnerships and limited partnerships, in which all partners and general partners, respectively, are public or private limited companies, limited partnership companies or a corresponding type of company
  • Large foundations
  • State-owned public limited companies

A company, business or foundation is regarded as large if two of the following criteria are exceeded in two consecutive financial years:

  • A balance sheet total of DKK 143 million
  • A net turnover of DKK 286 million
  • An average number of full-time employees of 250

Additionally, the following are covered:

  • Danish Ship Finance, financial companies and financial holding companies with securities traded on a regulated market in an EU/EEA country, or which have a balance sheet total of DKK 500 million or more in two consecutive financial years
  • Payment institutes with securities traded on a regulated market in an EU/EEA country, or which have a balance sheet total of DKK 500 million or more in two consecutive financial years
  • Investment associations, SIKAVs, special purpose associations and hedge associations where the value of the association’s assets constitute at least DKK 500 million or more in two consecutive financial years
  • Operators of regulated markets, clearing centres and securities centres with securities traded on a regulated market in an EU/EEA country, or which have a balance sheet total of DKK 500 million or more in two consecutive financial years

 

Obligations of the Companies covered

Under the amendment, the companies covered will be subject to the following new obligations:

  • Targets must be set for the quota of the underrepresented gender in the supreme management body
  • A policy to increase the quota of the underrepresented gender at the other levels of management must be prepared
  • In the annual report, as part of the management’s review, a status must be given of the fulfilment of the set target, including, if the set target has not been reached, why the company has failed to reach the target. The rules for reporting follow the principles for reporting on civic responsibility

The company itself must set what, taking the company’s situation into account, is a realistic target. When setting the target, the business of the company may, among other things, be taken into account, as it is recognised that some branches of trade are more attractive to women than others. The target must indicate the quota set as target as well as the time frame within which the company intends to achieve the indicated quotas. It appears from the explanatory notes to the bill that the time frame should generally not be longer than four years. 

 

The company’s policy for increasing the quota of the underrepresented gender may for instance contain a description of the company’s efforts and concrete initiatives in the area. Such initiatives may include cooperating with other companies, creating a framework for career development as well as initiatives to make the company attractive to both genders. The company will determine the relevant initiatives itself, taking the situation of the individual company into account. However, the company must under all circumstances take positive steps to reach the target.

 

Failure to set targets or to prepare the mentioned policy may result in a fine. In contrast, there is no penalty if a company should fail to reach a set target.

 

Exceptions
A gender distribution of 40/60 per cent between the genders is regarded as equal, regardless of which gender is in the majority. If this requirement is met, there is no obligation to set targets and to prepare the mentioned policy. In such cases, it is adequate to indicate the equal gender distribution in the annual report in the management’s review. However, if the distribution subsequently changes, the company will be obligated both to set targets and to prepare a policy to re-establish the distribution.


Additionally, as part of the consolidated accounts, it is possible to set targets and to prepare a policy for the group as a whole. Therefore, subsidiaries in a group may omit setting a target and to prepare a policy, cf. subsection 1, if the parent company sets a target and prepares a policy for the group as a whole.


Furthermore, there is a special trifle threshold, entailing that companies etc., who have employed fewer than 50 employees in the latest financial year may omit preparing a policy for increasing the quota of the underrepresented at their other levels of management.


 

Our Opinion

The amendments imply a number of new obligations for the companies covered. The obligations are flexible, but it is necessary for each individual company to perform a concrete assessment of what is a realistic and ambitious target for the company and thereafter take positive steps to reach this target.

 

Failure to set a target and/or to prepare a policy for achieving such a target may result in a fine, and against that background, there is reason to believe that the amendment in the course of a few years will contribute to creating real improvements in the quota of women in supreme company management bodies. 

 

 

The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis for decisions or considerations.