HF 4630

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/28/2022 02:39pm

A bill for an act
relating to corporations; requiring publicly held corporations to have a minimum
number of female directors and directors from underrepresented communities;
imposing penalties; requiring reports; proposing coding for new law in Minnesota
Statutes, chapter 302A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [302A.204] PUBLICLY HELD CORPORATIONS; MINIMUM
REQUIREMENTS FOR GENDER AND RACIAL DIVERSITY.
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new text begin Subdivision 1. new text end

new text begin Legislative findings and purpose. new text end

new text begin (a) The legislature finds and declares
as follows:
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new text begin (1) more racially and gender diverse boards of directors further the goals of the
Sarbanes-Oxley Act of 2002, which pushed for more independent boards of directors that
decrease the likelihood of corporate fraud;
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new text begin (2) more women directors serving on boards of directors of publicly held corporations
boosts the Minnesota economy and improves opportunities for women in the workplace;
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new text begin (3) directors that hold numerous board of directors seats exert considerable influence
over United States corporations and broader society. As a director gains a seat on more
boards of directors, the director gains influence over the creation of policy in more companies
and rise in corporate status amongst the corporate elite, which in turn enhances the director's
influence on the creation of policy;
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new text begin (4) numerous independent studies have concluded that publicly held corporations perform
better when women serve on the boards of directors, including:
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new text begin (i) a 2017 study by Morgan Stanley Capital International finding that companies that
began the five-year period from 2011 to 2016 with three or more female directors reported
earnings per share that were 45 percent higher than those companies with no female directors
at the beginning of the period;
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new text begin (ii) a 2014 Credit Suisse study finding that companies with at least one woman on the
board of directors had an average return on equity of 12.2 percent, compared to 10.1 percent
for companies with no female directors; and
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new text begin (iii) a Credit Suisse six-year global research study from 2006 to 2012, with more than
2,000 companies worldwide, showing that women on boards of directors improve business
performance for key metrics, including stock performance;
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new text begin (5) the United States Bureau of Labor Statistics reported that in the year 2019, 90 percent
of chief executives were white; additionally, according to the United States Bureau of Labor
Statistics, only 31 percent of African Americans and 22 percent of Latinos worked in
management, professional, and related occupations while 54 percent of Asians and 41
percent of whites worked in the same occupation;
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new text begin (6) according to 2018 data from Deloitte and the Alliance for Board Diversity, the
percentages of Fortune 500 company board of directors seats held by people identified as
African American or Black; Hispanic, Latino, or Latina; and Asian or Pacific Islander were
8.6 percent, 3.8 percent, and 3.7 percent, respectively; and
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new text begin (7) experts argue that affirmative action plans to increase the representation of women
and minorities in historically underrepresented fields and occupations further the legislative
goals of the Civil Rights Act of 1964. In the Civil Rights Act of 1964, it is clear that Title
VII:
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new text begin (i) directly permits the imposition of affirmative action plans to address past
discrimination and patterns of discrimination;
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new text begin (ii) permits state actors to create affirmative action plans designed to increase
representation of women and minorities in job positions in which they are historically
underrepresented, provided the plans are moderate, temporary, and designed and intended
to attain a balanced workforce; and
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new text begin (iii) does not forbid private actors from voluntarily creating action plans to increase
representation of women and minorities, provided the plans are temporary and do not create
an absolute bar to white or male employees.
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new text begin (b) Therefore, it is the intent of the legislature to require every publicly held corporation
in Minnesota to achieve diversity on the corporation's board of directors by having a
minimum number of female directors and directors from underrepresented communities on
the corporation's board of directors, as specified in this section.
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new text begin Subd. 2. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have the
meanings given.
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new text begin (b) "Director from an underrepresented community" means an individual who
self-identifies as (1) Black, African American, Hispanic, Latino, Asian, Pacific Islander,
Native American, Native Hawaiian, or Alaska Native, or (2) gay, lesbian, bisexual, or
transgender.
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new text begin (c) "Female" means an individual who self-identifies her gender as a woman, without
regard to the individual's designated sex at birth.
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new text begin Subd. 3. new text end

new text begin Required minimum representation. new text end

new text begin (a) No later than the close of the 2023
calendar year, a publicly held corporation whose principal executive office, according to
the corporation's United States Securities and Exchange Commission (SEC) 10-K form, is
located in Minnesota must have a minimum of one female director and one director from
an underrepresented community on the corporation's board of directors.
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new text begin (b) No later than the close of the 2024 calendar year, a publicly held corporation whose
principal executive office, according to the corporation's SEC 10-K form, is located in
Minnesota must comply with the following:
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new text begin (1) if the corporation's total number of directors is six or more, the corporation must
have a minimum of two female directors and two directors from an underrepresented
community; or
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new text begin (2) if the corporation's total number of directors is five or fewer, the corporation must
have a minimum of one female director and one director from an underrepresented
community.
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new text begin (c) A corporation may increase the number of directors on the corporation's board of
directors to comply with this section.
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new text begin Subd. 4. new text end

new text begin Reports. new text end

new text begin (a) No later than January 15, 2024, and annually thereafter, a publicly
held corporation subject to subdivision 2 must file a report with the secretary of state stating
the number of total directors on the corporation's board of directors, the number of female
directors, and the number of directors from an underrepresented community.
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new text begin (b) No later than March 1, 2024, and annually thereafter, the secretary of state must
publish a report on the secretary of state's website stating, at a minimum, the following
information:
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new text begin (1) the number of publicly held corporations whose principal executive office, according
to the corporation's SEC 10-K form, is located in Minnesota and which have at least one
female director and one director from an underrepresented community;
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new text begin (2) the number of publicly held corporations subject to this section that complied with
the requirements of this section during at least one point during the preceding calendar year;
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new text begin (3) the number of publicly held corporations that moved their United States headquarters
to Minnesota from another state or out of Minnesota into another state during the preceding
calendar year; and
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new text begin (4) the number of publicly held corporations that were subject to this section during the
preceding year, but are no longer publicly traded.
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new text begin Subd. 5. new text end

new text begin Penalty. new text end

new text begin (a) The secretary of state may impose fines for violations of this section
as follows:
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new text begin (1) for failure to timely file board of directors member information with the secretary
of state pursuant to subdivision 3, $100,000;
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new text begin (2) for a first violation of subdivision 2, $100,000; and
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new text begin (3) for a second or subsequent violation of this section, $300,000.
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new text begin (b) For the purposes of this subdivision, each director seat required by this section to be
held by a female or a director from an underrepresented community that is not held by a
female or a director from an underrepresented community during at least a portion of a
calendar year is a violation.
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