THIRTY-FIRST LEGISLATURE, 2021
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO EQUITABLE GENDER REPRESENTATION ON CORPORATE BOARDS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the inclusion of individuals of all genders on boards of directors of publicly held corporations will boost the State's economy; improve opportunities for all individuals in the workplace; protect Hawaii taxpayers, shareholders, and retirees; and lead to other societal benefits. The legislature recognizes that numerous independent studies have concluded that publicly held corporations generally perform better, or, at the very least, show no negative effects, when there is gender diversity of their boards of directors. A 2017 study by MSCI ESG RESEARCH LLC found that during the period from 2011 to 2016, United States companies with three or more female directors reported earnings per share that were thirty-seven per cent higher than earnings for companies with no female directors. A 2016 study in the Journal of Social Issues acknowledged that while findings regarding the effects of gender diversity of corporate boards are mixed, with no clear positive or negative trend, there are no negative effects of such diversity, particularly for companies' accounting outcomes. In 2014, Credit Suisse found that companies with at least one woman on their boards since 2005 had an average return on equity of 14.1 per cent, compared to 11.2 per cent for companies with no female directors. The same report found that companies with women on their boards had a price‑to‑book value of 2.3 times the value in comparison to 1.8 times the value for companies without women on their boards. Further, a 2012 study from the University of California, Berkeley found that companies with more women on their boards are more likely to "create a sustainable future" by, among other matters, instituting strong governance structures with a high level of transparency.
The legislature also recognizes, however, that studies predict that it will take forty to fifty years to achieve gender parity if proactive measures are not taken. The legislature notes that economically thriving European countries, such as Germany, France, Norway, and the Netherlands, have addressed the lack of gender diversity on corporate boards by instituting quotas mandating that thirty to forty per cent of seats be held by female directors.
The purpose of this Act is to require publicly held domestic corporations to include individuals of all genders among the directors of their corporate boards.
SECTION 2. Chapter 414, Hawaii Revised Statutes, is amended by adding a new section to part IX, subpart A, to be appropriately designated and to read as follows:
"§414- Boards of publicly held corporations; equitable gender representation. (a) Each publicly held domestic corporation whose principal executive office is located within the State shall comply with the following equitable gender representation requirements:
(1) Beginning no later than December 31, 2021, have a gender-diverse board; and
(2) Beginning no later than December 31, 2023, have a minimum of:
(A) Three male or non-binary directors on its board; and
(B) Three female or non-binary directors on its board;
provided that, if its number of directors is five, the corporation shall have at least two male or non-binary directors and at least two female or non-binary directors; provided further that, if its number of directors is four or fewer, the corporation shall have at least one male or non-binary director and at least one female or non-binary director.
A corporation may increase the number of directors on its board to comply with this section.
(b) Each corporation subject to this section shall report on its compliance to the department in the form and substance directed by the department.
(c) No later than July 1, 2024, the department shall publish a report on its website documenting the number of all publicly held domestic corporations whose principal executive office is located within the State that have at least one male or non-binary director and one female or non-binary director.
(d) No later than March 1, 2025, and no later than each March 1 thereafter, the department shall publish an annual report on its website that shall provide, at a minimum:
(1) The number of corporations subject to this section that complied with this section for any period of time during the preceding calendar year;
(2) The number of publicly held corporations that moved their United States headquarters to this State from outside of the State during the preceding calendar year; and
(3) The number of corporations that were subject to this section at some point during the preceding calendar year, but subsequently ceased to be publicly held corporations.
(e) The department shall adopt rules pursuant to chapter 91 to implement this section.
(f) In addition to any other applicable fine or penalty, an administrative fine shall be imposed upon a corporation subject to this section for failure to timely file with the department information that is required by any rule adopted by the department. For a first violation, the fine shall be $500. For any second violation or subsequent violation that occurs within ten years after the most recent violation, the fine shall be $1,000.
(g) In addition to any other applicable fine or penalty, an administrative fine shall be imposed upon a corporation subject to this section for failure to comply with the equitable gender representation requirements of subsection (a). For a first violation, the fine shall be $1,000. For any second violation or subsequent violation that occurs within ten years after the most recent violation, the fine shall be $5,000. For the purposes of this subsection, each director's seat not in compliance with this section shall count as a separate violation.
(h) For purposes of this section:
"Department" means the department of commerce and consumer affairs.
"Principal executive office" means a corporation's principal executive office, as listed on the corporation's most recent United States Security and Exchange Commission FORM 10-K.
"Publicly held corporation" means a corporation with outstanding shares listed on a major United States stock exchange."
SECTION 3. Section 414-16, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:
"(d) The department director's duty to file
documents under this section is ministerial[
.]; provided that the department
shall perform its duties under section 414- . The department director's filing or refusing
to file a document does not:
(1) Affect the validity or invalidity of the document in whole or part;
(2) Relate to the correctness or incorrectness of information contained in the document; and
(3) Create a presumption that the document is valid or invalid or that information contained in the document is correct or incorrect."
SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 5. This Act shall take effect on July 1, 2021.
Gender Representation; Corporate Boards; Department of Commerce and Consumer Affairs; Reports
Requires publicly held domestic corporations to have a gender-diverse board of directors. Establishes reporting requirements for the Department of Commerce and Consumer Affairs and penalties. (SD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.