Text of WA SB 5142 (2020)

AN ACT Relating to increasing equitable gender representation on 1 corporate boards; amending RCW 23.95.255 and 43.07.130; adding a new 2 section to chapter 23B.08 RCW; creating a new section; and 3 prescribing penalties. 4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON: 5 NEW SECTION. Sec. 1. (1) The legislature finds that it has a 6 substantial interest in gender equity at all levels, including the 7 highest levels of corporations. It also finds that over the last 8 decade, less than satisfactory progress has been made with regard to 9 gender equity on the boards of corporations. Numerous independent 10 studies have concluded that publicly held companies perform better 11 when women serve on their boards of directors, including the 12 following: 13 (a) A 2017 study by morgan stanley capital international (MSCI) 14 found that United States' companies that began the five-year period 15 from 2011 to 2016 with three or more female directors reported 16 earnings per share that were forty-five percent higher than those 17 companies with no female directors at the beginning of the period. 18 (b) In 2014, credit suisse found that companies with at least one 19 woman on the board had an average return on equity of 12.2 percent, 20 compared to 10.1 percent for companies with no female directors. 21 S-0114.7 SENATE BILL 5142 State of Washington 66th Legislature 2019 Regular Session By Senators Wellman, Keiser, Saldaña, Dhingra, Kuderer, Nguyen, Hunt, Das, and Randall Prefiled 01/11/19. p. 1 SB 5142 Additionally, the price-to-book value of these firms was greater for 1 those with women on their boards: 2.4 times the value in comparison 2 to 1.8 times the value for boards with no women. 3 (c) A 2012 University of California, Berkeley study called "women 4 create a sustainable future" found that companies with more women on 5 their boards are more likely to "create a sustainable future" by, 6 among other things, instituting strong governance structures with a 7 high level of transparency. 8 (d) Credit suisse conducted a six-year global research study from 9 2006 to 2012, with more than two thousand companies worldwide, 10 showing that women on boards improve business performance for key 11 metrics, including stock performance. For companies with a market 12 capitalization of more than ten billion dollars, those with women 13 directors on boards outperformed shares of comparable businesses with 14 all-male boards by twenty-six percent. This report included the 15 following findings: 16 (i) There has been a greater correlation between stock 17 performance and the presence of women on a board since the financial 18 crisis in 2008; 19 (ii) Companies with women on their boards of directors 20 significantly outperformed others when the recession occurred; 21 (iii) Companies with women on their boards tend to be somewhat 22 risk averse and carry less debt, on average; and 23 (iv) Net income growth for companies with women on their boards 24 averaged fourteen percent over a six-year period, compared with ten 25 percent for companies with no women directors. 26 (2) The legislature also finds that more women directors serving 27 on boards of directors will boost Washington's economy and improve 28 opportunities for women in the workplace. However, studies predict 29 that it will take forty or fifty years to achieve gender parity if 30 something is not done proactively. These studies include: 31 (a) A 2015 study conducted by the United States government 32 accountability office estimated that it could take more than forty 33 years for the numbers of women on boards to match men; and 34 (b) The 2017 equilar gender diversity index revealed that it will 35 take nearly forty years, until 2055, for the russell 3000 companies 36 nationwide to reach gender parity. 37 (3) Therefore, the legislature finds that standards for 38 membership of boards need to be set in order to support a strong 39 Washington economy. 40 p. 2 SB 5142 NEW SECTION. Sec. 2. A new section is added to chapter 23B.08 1 RCW to read as follows: 2 (1)(a) By December 31, 2020, a corporation must have a minimum of 3 one female director on its board. 4 (b) By December 31, 2022, a corporation must have a minimum of: 5 (i) Thirty percent female directors, if its number of directors 6 is twenty or more; 7 (ii) Three female directors, if its number of directors is ten to 8 nineteen; or 9 (iii) One female director, if its number of directors is nine or 10 fewer. 11 (2)(a) By December 31, 2020, the office of the secretary of state 12 must publish on its web site, the number of corporations that have at 13 least one female director. 14 (b) By June 30, 2021, and annually thereafter, the office of the 15 secretary of state must publish a report on its web site that 16 includes the number of: 17 (i) Corporations; 18 (ii) Corporations in compliance with this section during at least 19 one point in the preceding calendar year; and 20 (iii) Corporations fined under (c) of this subsection. 21 (c) The secretary of state shall enforce this section and may 22 impose fines on corporations for violations of this section as 23 follows: 24 (i) Failing to meet the requirements of subsection (1) of this 25 section is punishable by a fine of one hundred thousand dollars for 26 the first violation and three hundred thousand dollars for each 27 subsequent violation. 28 (ii) Failing to timely file board member information with the 29 secretary of state pursuant to a rule adopted under subsection (4) of 30 this section is punishable by a fine of one hundred thousand dollars. 31 (iii) Beginning in 2025, and every five years thereafter, the 32 fine amounts listed in (c)(i) and (ii) of this subsection shall 33 increase by ten percent. 34 (d) Fines imposed under (c) of this subsection shall be deposited 35 into the secretary of state's revolving fund created in RCW 36 43.07.130. 37 (3) For purposes of this section, "female" means an individual 38 who self-identifies her gender as a woman, without regard to the 39 individual's designated sex at birth. 40 p. 3 SB 5142 (4) The office of the secretary of state may adopt rules to 1 implement this section. 2 (5) The attorney general may adopt rules to implement this 3 section. 4 Sec. 3. RCW 23.95.255 and 2017 c 31 s 2 are each amended to read 5 as follows: 6 (1) A domestic entity other than a limited liability partnership 7 or nonprofit corporation shall, within one hundred twenty days of the 8 date on which its public organic record became effective, deliver to 9 the secretary of state for filing an initial report that states the 10 information required under subsection (2) of this section, as well as 11 information regarding the gender of each of the domestic entity's 12 directors on its board of directors. 13 (2) A domestic entity or registered foreign entity shall deliver 14 to the secretary of state for filing an annual report that states: 15 (a) The name of the entity and its jurisdiction of formation; 16 (b) The name and street and mailing addresses of the entity's 17 registered agent in this state; 18 (c) The street and mailing addresses of the entity's principal 19 office; 20 (d) In the case of a registered foreign entity, the street and 21 mailing address of the entity's principal office in the state or 22 country under the laws of which it is incorporated; 23 (e) The names of the entity's governors; 24 (f) A brief description of the nature of the entity's business; 25 and 26 (g) The entity's unified business identifier number. 27 (3) Information in an initial or annual report must be current as 28 of the date the report is executed by the entity. 29 (4) Annual reports must be delivered to the secretary of state on 30 a date determined by the secretary of state and at such additional 31 times as the entity elects. 32 (5) If an initial or annual report does not contain the 33 information required by this section, the secretary of state promptly 34 shall notify the reporting entity in a record and return the report 35 for correction. 36 (6) If an initial or annual report contains the name or address 37 of a registered agent that differs from the information shown in the 38 records of the secretary of state immediately before the annual 39 p. 4 SB 5142 report becomes effective, the differing information in the initial or 1 annual report is considered a statement of change under RCW 2 23.95.430. 3 (7) The secretary of state shall send to each domestic entity and 4 registered foreign entity, not less than thirty or more than ninety 5 days prior to the expiration date of the entity's annual renewal, a 6 notice that the entity's annual report must be filed as required by 7 this chapter and that any applicable annual renewal fee must be paid, 8 and stating that if the entity fails to file its annual report or pay 9 the annual renewal fee it will be administratively dissolved. The 10 notice may be sent by postal or email as elected by the entity, 11 addressed to its registered agent within the state, or to an 12 electronic address designated by the entity in a record retained by 13 the secretary of state. Failure of the secretary of state to provide 14 any such notice does not relieve a domestic entity or registered 15 foreign entity from its obligations to file the annual report 16 required by this chapter or to pay any applicable annual renewal fee. 17 The option to receive the notice provided under this section by email 18 may be selected only when the secretary of state makes the option 19 available. 20 Sec. 4. RCW 43.07.130 and 2015 c 176 s 8102 are each amended to 21 read as follows: 22 There is created within the state treasury a revolving fund, to 23 be known as the "secretary of state's revolving fund," which must be 24 used by the office of the secretary of state to defray the costs of 25 providing registration and information services authorized by law by 26 the office of the secretary of state, and any other cost of carrying 27 out the functions of the secretary of state under Title 11, 18, 19, 28 23, 23B, 24, 25, 26, 30A, 30B, 42, 43, or 64 RCW. 29 The secretary of state is authorized to charge a fee for 30 publications in an amount which will compensate for the costs of 31 printing, reprinting, and distributing such printed matter. Fees or 32 fines recovered by the secretary of state under RCW 43.07.120(2), 33 19.09.305, 19.09.315, 19.09.440, 23.95.260(1) (a)(ii) and (iii) and 34 (d), section 2 of this act, or 46.64.040, and such other moneys as 35 are expressly designated for deposit in the secretary of state's 36 revolving fund must be placed in the secretary of state's revolving 37 fund. 38 p. 5 SB 5142 During the 2005-2007 fiscal biennium, the legislature may 1 transfer from the secretary of state's revolving fund to the state 2 general fund such amounts as reflect the excess fund balance of the 3 fund. 4 --- END --- p. 6 SB 5142