Shearman And Sterling

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Jan 31, 2020

New York State Requires Companies to Report on Number of Women Corporate Board Directors

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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[1] 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.

Our Take

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.

Footnotes

[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.

Authors and Contributors

Doreen E. Lilienfeld

Partner

Compensation, Governance & ERISA

+1 212 848 7171

+1 212 848 7171

+1 650 838 3804

+1 650 838 3804

New York

John J. Cannon III

Partner

Compensation, Governance & ERISA

+1 212 848 8159

+1 212 848 8159

New York

Gillian Emmett Moldowan

Partner

Compensation, Governance & ERISA

+1 212 848 5356

+1 212 848 5356

New York

Matthew Behrens

Associate

Compensation, Governance & ERISA

+1 212 848 7045

+1 212 848 7045

New York

Lona Nallengara

Partner

Capital Markets

+1 212 848 8414

+1 212 848 8414

New York

Richard Alsop

Partner

Capital Markets

+1 212 848 7333

+1 212 848 7333

New York

Kristina L. Trauger

Partner

Capital Markets

+1 212 848 4879

+1 212 848 4879

New York

Sonia Khandekar

Associate

Compensation, Governance & ERISA

+1 212 848 5325

+1 212 848 5325