Text of MN SF 4274 (2022)
Publicly held corporations requirement to have a minimum number of female directors and directors from underrepresented communities
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As introduced
9,202 characters
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A bill for an act
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relating to corporations; requiring publicly held corporations to have a minimum
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number of female directors and directors from underrepresented communities;
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imposing penalties; requiring reports; proposing coding for new law in Minnesota
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Statutes, chapter 302A.
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
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Section 1. [302A.204] PUBLICLY HELD CORPORATIONS; MINIMUM
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REQUIREMENTS FOR GENDER AND RACIAL DIVERSITY.
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Subdivision 1. Legislative findings and purpose. (a) The legislature finds and declares
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as follows:
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(1) more racially and gender diverse boards of directors further the goals of the
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Sarbanes-Oxley Act of 2002, which pushed for more independent boards of directors that
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decrease the likelihood of corporate fraud;
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(2) more women directors serving on boards of directors of publicly held corporations
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boosts the Minnesota economy and improves opportunities for women in the workplace;
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(3) directors that hold numerous board of directors seats exert considerable influence
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over United States corporations and broader society. As a director gains a seat on more
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boards of directors, the director gains influence over the creation of policy in more companies
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and rise in corporate status amongst the corporate elite, which in turn enhances the director's
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influence on the creation of policy;
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(4) numerous independent studies have concluded that publicly held corporations perform
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better when women serve on the boards of directors, including:
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Section 1.
22-07285
as introduced
03/22/22
REVISOR
RSI/HL
SENATE
STATE OF MINNESOTA
S.F. No. 4274
NINETY-SECOND SESSION
(SENATE AUTHORS: LÓPEZ FRANZEN and Kunesh)
OFFICIAL STATUS
D-PG
DATE
Introduction and first reading
03/24/2022
Referred to Civil Law and Data Practices Policy
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(i) a 2017 study by Morgan Stanley Capital International finding that companies that
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began the five-year period from 2011 to 2016 with three or more female directors reported
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earnings per share that were 45 percent higher than those companies with no female directors
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at the beginning of the period;
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(ii) a 2014 Credit Suisse study finding that companies with at least one woman on the
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board of directors had an average return on equity of 12.2 percent, compared to 10.1 percent
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for companies with no female directors; and
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(iii) a Credit Suisse six-year global research study from 2006 to 2012, with more than
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2,000 companies worldwide, showing that women on boards of directors improve business
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performance for key metrics, including stock performance;
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(5) the United States Bureau of Labor Statistics reported that in the year 2019, 90 percent
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of chief executives were white; additionally, according to the United States Bureau of Labor
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Statistics, only 31 percent of African Americans and 22 percent of Latinos worked in
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management, professional, and related occupations while 54 percent of Asians and 41
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percent of whites worked in the same occupation;
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(6) according to 2018 data from Deloitte and the Alliance for Board Diversity, the
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percentages of Fortune 500 company board of directors seats held by people identified as
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African American or Black; Hispanic, Latino, or Latina; and Asian or Pacific Islander were
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8.6 percent, 3.8 percent, and 3.7 percent, respectively; and
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(7) experts argue that affirmative action plans to increase the representation of women
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and minorities in historically underrepresented fields and occupations further the legislative
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goals of the Civil Rights Act of 1964. In the Civil Rights Act of 1964, it is clear that Title
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VII:
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(i) directly permits the imposition of affirmative action plans to address past
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discrimination and patterns of discrimination;
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(ii) permits state actors to create affirmative action plans designed to increase
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representation of women and minorities in job positions in which they are historically
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underrepresented, provided the plans are moderate, temporary, and designed and intended
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to attain a balanced workforce; and
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(iii) does not forbid private actors from voluntarily creating action plans to increase
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representation of women and minorities, provided the plans are temporary and do not create
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an absolute bar to white or male employees.
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Section 1.
22-07285
as introduced
03/22/22
REVISOR
RSI/HL
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(b) Therefore, it is the intent of the legislature to require every publicly held corporation
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in Minnesota to achieve diversity on the corporation's board of directors by having a
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minimum number of female directors and directors from underrepresented communities on
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the corporation's board of directors, as specified in this section.
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Subd. 2. Definitions. (a) For purposes of this section, the following terms have the
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meanings given.
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(b) "Director from an underrepresented community" means an individual who
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self-identifies as (1) Black, African American, Hispanic, Latino, Asian, Pacific Islander,
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Native American, Native Hawaiian, or Alaska Native, or (2) gay, lesbian, bisexual, or
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transgender.
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(c) "Female" means an individual who self-identifies her gender as a woman, without
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regard to the individual's designated sex at birth.
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Subd. 3. Required minimum representation. (a) No later than the close of the 2023
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calendar year, a publicly held corporation whose principal executive office, according to
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the corporation's United States Securities and Exchange Commission (SEC) 10-K form, is
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located in Minnesota must have a minimum of one female director and one director from
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an underrepresented community on the corporation's board of directors.
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(b) No later than the close of the 2024 calendar year, a publicly held corporation whose
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principal executive office, according to the corporation's SEC 10-K form, is located in
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Minnesota must comply with the following:
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(1) if the corporation's total number of directors is six or more, the corporation must
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have a minimum of two female directors and two directors from an underrepresented
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community; or
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(2) if the corporation's total number of directors is five or fewer, the corporation must
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have a minimum of one female director and one director from an underrepresented
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community.
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(c) A corporation may increase the number of directors on the corporation's board of
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directors to comply with this section.
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Subd. 4. Reports. (a) No later than January 15, 2024, and annually thereafter, a publicly
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held corporation subject to subdivision 2 must file a report with the secretary of state stating
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the number of total directors on the corporation's board of directors, the number of female
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directors, and the number of directors from an underrepresented community.
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Section 1.
22-07285
as introduced
03/22/22
REVISOR
RSI/HL
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(b) No later than March 1, 2024, and annually thereafter, the secretary of state must
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publish a report on the secretary of state's website stating, at a minimum, the following
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information:
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(1) the number of publicly held corporations whose principal executive office, according
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to the corporation's SEC 10-K form, is located in Minnesota and which have at least one
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female director and one director from an underrepresented community;
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(2) the number of publicly held corporations subject to this section that complied with
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the requirements of this section during at least one point during the preceding calendar year;
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(3) the number of publicly held corporations that moved their United States headquarters
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to Minnesota from another state or out of Minnesota into another state during the preceding
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calendar year; and
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(4) the number of publicly held corporations that were subject to this section during the
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preceding year, but are no longer publicly traded.
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Subd. 5. Penalty. (a) The secretary of state may impose fines for violations of this section
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as follows:
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(1) for failure to timely file board of directors member information with the secretary
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of state pursuant to subdivision 3, $100,000;
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(2) for a first violation of subdivision 2, $100,000; and
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(3) for a second or subsequent violation of this section, $300,000.
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(b) For the purposes of this subdivision, each director seat required by this section to be
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held by a female or a director from an underrepresented community that is not held by a
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female or a director from an underrepresented community during at least a portion of a
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calendar year is a violation.
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Section 1.
22-07285
as introduced
03/22/22
REVISOR
RSI/HL