Netherlands: Inclusion Quota and Target Figures Act: Approaching Deadline To Report Target Figures and Action Plan
On 1 January 2022, the Dutch Inclusion Quota and Target Figures Act was implemented in the Netherlands. This law aims to achieve greater gender balance at the top and sub-top levels of corporate organizations, including the board of directors and supervisory boards. The law applies to Dutch–listed companies and large Dutch companies. A company qualifies as “large” based on Dutch financial reporting requirements, which means it must meet at least two of the following criteria for two consecutive fiscal years: i) The asset value exceeds EUR 20 million; ii) the net turnover exceeds EUR 40 million; and iii) the average number of employees is 250 or more.
The Inclusion Quota and Target Figures Act consists of an inclusion quota, a target figure scheme, and reporting obligations. Under this law, companies are required to formulate “appropriate and ambitious” goals for the composition of their top and sub-top positions. These goals are not fixed but should be tailored to the size of the executive level and the company’s structure. “Appropriate” means that the target figure should be proportional to the level of management and the company’s structure, while “ambitious” implies that it should aim for a more balanced gender ratio than the current one. Therefore, the target figure cannot be zero.
Additionally, large Dutch corporations must develop an action plan to achieve these objectives. The action plan outlines the activities and policies the company will implement to achieve a balanced gender ratio. This may include recruitment and selection policies, measures related to work, learning, and caregiving, communication policies, and compensation policies, among others.
Works councils can play a significant role in determining target figures and action plans and in achieving these goals. The legal reporting requirement provides works councils with a new opportunity to prioritise diversity and inclusion. In addition to collectively discussing compliance with this legal obligation, the works council also has influence over matters such as changes in recruitment and selection policies (right to consent), the appointment of new directors (advisory right), and the nomination of supervisory board members (nomination right).
The reporting obligations apply to fiscal years starting on or after 1 January 2022. Assuming a company’s fiscal year ends on 31 December 2022, the first report must be submitted by 31 October 2023, at the latest. It is also possible to submit this report earlier (the portal has been open since 1 January 2023). The reporting must be done digitally, using a format developed by SER, which is accessible through the diversity portal. Based on these reports, the SER annually publishes information on progress in diversity at the top of Dutch businesses.
Regarding enforcement, the SER plays a monitoring and supporting role; it can monitor a company’s progress and compliance with transparency requirements based on its reports. However, the legal provisions and reporting obligations are enforced under civil law. If a large Dutch corporation fails to set target figures, develop an action plan, or is not transparent about results, shareholders can hold the board of directors and the supervisory board accountable. If the general meeting is dissatisfied with the responses, it can, as a last resort, refuse to approve the annual financial statements.
Key Action Points for Human Resources and In-house Counsel
Large Dutch corporations must submit their reports to the SER by 31 October 2023, concerning the following:
- The number of men and women on the board of directors, the supervisory board, and senior management at the end of the fiscal year.
- Their goal is in the form of a target figure.
- Their action plan to achieve these objectives.
- The Inclusion Quota and Targets Act was introduced on 1 January 2022.
- The act requires large Dutch companies to report to SER on their equality objectives within the top and sub-top levels of the company, as well as to submit a plan of action to achieve these objectives.