Text of IL SB 76 (2020)

101ST GENERAL ASSEMBLY State of Illinois 2019 and 2020 SB0076 Introduced 1/23/2019, by Sen. Cristina Castro SYNOPSIS AS INTRODUCED: 805 ILCS 5/8.90 new Amends the Business Corporation Act of 1983. Requires a publicly held domestic or foreign corporation whose principal executive offices are located in Illinois to have: (i) no later than July 31, 2020, a minimum of one female director on its board; and (ii) no later than December 31, 2022, a minimum of 3 female directors if its number of directors is 6 or more, a minimum of 2 female directors if its number of directors is 5, or a minimum of one female director if its number of directors is 4 or fewer. Permits a corporation to increase the number of directors on its board to comply with the requirement. Requires the Secretary of State to publish reports on its Internet website that documents: (1) the number of domestic and foreign corporations whose principal executive offices are located in Illinois and who have at least one female director; and (2) the number of publicly held corporations that moved their United States headquarters to Illinois from another state or out of Illinois into another state during the preceding calendar year and other specified information. Permits the Secretary of State to adopt rules to administer the provisions and impose fines as specified. Provides that the provisions apply to a foreign corporation that is a publicly held corporation to the exclusion of the law of the jurisdiction in which the foreign corporation is incorporated. Effective immediately. LRB101 07114 TAE 52151 b A BILL FOR SB0076LRB101 07114 TAE 52151 b 1 AN ACT concerning business. 2 Be it enacted by the People of the State of Illinois, 3represented in the General Assembly: 4 Section 5. The Business Corporation Act of 1983 is amended 5by adding Section 8.90 as follows: 6 (805 ILCS 5/8.90 new) 7 Sec. 8.90. Female directors. 8 (a) Findings and policy. 9 (1) More female directors serving on boards of 10 directors of publicly held corporations will boost the 11 Illinois economy, improve opportunities for women in the 12 workplace, and protect Illinois taxpayers, shareholders, 13 and retirees, including retired State employees whose 14 pensions are managed by the State. Yet studies predict that 15 it will take 40 or 50 years to achieve gender parity, if 16 something is not done proactively. 17 (2) In May 2015 and again in May 2017, the General 18 Assembly passed resolutions urging that, within the next 3 19 years, all public companies in Illinois increase the number 20 of women on their boards of directors ranging from one to 21 3, depending upon the size of their boards. Five other 22 states have passed similar resolutions urging more female 23 directors on corporate boards in their states. SB0076- 2 -LRB101 07114 TAE 52151 b 1 (A) A 2017 study by MSCI found that United States 2 companies that began the 5-year period from 2011 to 3 2016 with 3 or more female directors reported earnings 4 per share that were 45% higher than those companies 5 with no female directors at the beginning of the 6 period. 7 (B) In 2014, Credit Suisse found that companies 8 with at least one woman on the board had an average 9 return on equity of 12.2%, compared to 10.1% for 10 companies with no female directors. Additionally, the 11 price-to-book value of these firms was greater for 12 those with women on their boards: 2.4 times the value 13 in comparison to 1.8 times the value for zero-women 14 boards. 15 (C) A 2012 University of California, Berkeley 16 study entitled "Women Create a Sustainable Future" 17 found that companies with more women on their boards 18 are more likely to create a sustainable future by, 19 among other things, instituting strong governance 20 structures with a high level of transparency. 21 (D) Credit Suisse conducted a 6-year global 22 research study from 2006 to 2012, with more than 2,000 23 companies worldwide, showing that women on boards 24 improve business performance for key metrics, 25 including stock performance. For companies with a 26 market capitalization of more than $10,000,000,000, SB0076- 3 -LRB101 07114 TAE 52151 b 1 those with female directors on boards outperformed 2 shares of comparable businesses with all-male boards 3 by 26%. 4 (E) The Credit Suisse report included the 5 following findings: 6 (i) There has been a greater correlation 7 between stock performance and the presence of 8 women on a board since the financial crisis in 9 2008. 10 (ii) Companies with women on their boards of 11 directors significantly outperformed others when 12 the recession occurred. 13 (iii) Companies with women on their boards 14 tend to be somewhat risk averse and carry less 15 debt, on average. 16 (iv) Net income growth for companies with 17 women on their boards averaged 14% over a 6-year 18 period, compared with 10% for companies with no 19 female directors. 20 (4) Other countries have addressed the lack of gender 21 diversity on corporate boards by instituting quotas 22 mandating 30% to 40% of seats to be held by female 23 directors. Germany is the largest economy to mandate a 24 quota requiring that 30% of public company board seats be 25 held by women; in 2003, Norway was the first country to 26 legislate a mandatory 40% quota for female representation SB0076- 4 -LRB101 07114 TAE 52151 b 1 on corporate boards. Since then, other European nations 2 that have legislated similar quotas include France, Spain, 3 Iceland, and the Netherlands. 4 (5) 43% of Illinois public companies in the Russell 5 3000 index have zero or only one woman on their boards of 6 directors. Of the Fortune 1000 companies headquartered in 7 Illinois, only 10% have 20% or more of their boards 8 comprised of women, and women hold only 19.5% of the board 9 seats overall. 10 (6) If measures are not taken to proactively increase 11 the numbers of women serving on corporate boards, studies 12 have shown that it will take decades, as many as 40 or 50 13 years, to achieve gender parity among directors, 14 including: 15 (A) A 2015 study conducted by the United States 16 Government Accountability Office estimated that it 17 could take more than 40 years for the numbers of women 18 on boards to match men. 19 (B) The 2017 Equilar Gender Diversity Index 20 revealed that it will take nearly 40 years for the 21 Russell 3000 companies nationwide to reach gender 22 parity — the year 2055. 23 (C) Nearly one-half of the 75 largest initial 24 public offerings from 2014 to 2016 went public with no 25 women on their boards. 26 (7) Further, several studies have concluded that SB0076- 5 -LRB101 07114 TAE 52151 b 1 having 3 women on the board, rather than just one or none, 2 increases the effectiveness of boards, including: 3 (A)(i) According to the study entitled "Women 4 Directors on Corporate Boards From Tokenism to 5 Critical Mass", by M. Torchia, A. Calabrò, and M. Huse, 6 published in the Journal of Business Ethics in 2011, 7 and a report entitled "Critical Mass on Corporate 8 Boards: Why Three or More Women Enhance Governance", 9 attaining critical mass, going from one or 2 female 10 directors to at least 3 female directors, creates an 11 environment where women are no longer seen as outsiders 12 and are able to influence the content and process of 13 board discussions more substantially. 14 (ii) Boards of directors need to have at least 3 15 women to enable them to interact and exercise an 16 influence on the working style, processes, and tasks of 17 the board, in turn positively affecting the level of 18 organizational innovation within the firm they govern. 19 (B)(i) A 2016 McKinsey and Company study entitled 20 "Women Matter" showed nationwide that companies where 21 women are most strongly represented at board or 22 top-management levels are also the companies that 23 perform the best in profitability, productivity, and 24 workforce engagement. 25 (ii) Companies with 3 or more women in senior 26 management functions score even more highly, on SB0076- 6 -LRB101 07114 TAE 52151 b 1 average, on the organizational performance profile, 2 than companies with no women on boards or in the 3 executive ranks. When there are at least 3 women on 4 corporate boards with an average membership of 10 5 directors, performance increases significantly. 6 (b) Definitions. As used in this Section: 7 "Female" means an individual who self-identifies her 8gender as a woman, without regard to the individual's 9designated sex at birth. 10 "Publicly held corporation" means a corporation or foreign 11corporation with outstanding shares listed on a major United 12States stock exchange. 13 (c) Composition of board of directors. 14 (1) No later than July 31, 2020, a publicly held 15 domestic or foreign corporation whose principal executive 16 offices, according to the corporation's Form 10-K, are 17 located in Illinois shall have a minimum of one female 18 director on its board. A corporation may increase the 19 number of directors on its board to comply with this 20 Section. 21 (2) No later than December 31, 2022, a publicly held 22 domestic or foreign corporation whose principal executive 23 offices, according to the corporation's Form 10-K, are 24 located in Illinois shall comply with the following: 25 (A) If its number of directors is 6 or more, the 26 corporation shall have a minimum of 3 female directors. SB0076- 7 -LRB101 07114 TAE 52151 b 1 (B) If its number of directors is 5, the 2 corporation shall have a minimum of 2 female directors. 3 (C) If its number of directors is 4 or fewer, the 4 corporation shall have a minimum of one female 5 director. 6 (3) No later than December 1, 2020, the Secretary of 7 State shall publish a report on its Internet website 8 documenting the number of domestic and foreign 9 corporations whose principal executive offices, according 10 to the corporation's Form 10-K, are located in Illinois and 11 who have at least one female director. 12 (4) No later than March 1, 2021, and annually 13 thereafter, the Secretary of State shall publish a report 14 on its Internet website regarding, at a minimum, all of the 15 following: 16 (A) The number of corporations subject to this 17 Section that were in compliance with the requirements 18 of this Section during at least one point during the 19 preceding calendar year. 20 (B) The number of publicly held corporations that 21 moved their United States headquarters to Illinois 22 from another state or out of Illinois into another 23 state during the preceding calendar year. 24 (C) The number of publicly held corporations that 25 were subject to this Section during the preceding year, 26 but are no longer publicly traded. SB0076- 8 -LRB101 07114 TAE 52151 b 1 (5)(A) The Secretary of State may adopt rules to 2 implement this Section. The Secretary of State may impose 3 fines for violations of this Section as follows: 4 (i) For failure to timely file board member 5 information with the Secretary of State pursuant to a 6 regulation adopted in accordance with this paragraph, 7 a fine of $100,000. 8 (ii) For a first violation, a fine of $100,000. 9 (iii) For a second or subsequent violation, a fine 10 of $300,000. 11 (B) For the purposes of this paragraph, each director 12 seat required by this Section to be held by a female that 13 is not held by a female during at least a portion of a 14 calendar year shall count as a violation. 15 (C) For purposes of this paragraph, a female director 16 having held a seat for at least a portion of the year shall 17 not be a violation. 18 (D) Fines collected in accordance with this Section 19 shall be available, upon appropriation by the General 20 Assembly, for use by the Secretary of State to offset the 21 cost of administering this Section. 22 (d) This Section applies to a foreign corporation that is a 23publicly held corporation to the exclusion of the law of the 24jurisdiction in which the foreign corporation is incorporated. 25 Section 99. Effective date. This Act takes effect upon 26becoming law.