S-0114.7

SENATE BILL 5142

BySenators Wellman, Keiser, Saldaña, Dhingra, Kuderer, Nguyen, Hunt, Das, Randall, Cleveland, Conway, and Darneille

AN ACT Relating to increasing equitable gender representation on corporate boards; amending RCW 23.95.255 and 43.07.130; adding a new section to chapter 23B.08 RCW; creating a new section; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

(a) A 2017 study by morgan stanley capital international (MSCI) found that United States' companies that began the five-year period from 2011 to 2016 with three or more female directors reported earnings per share that were forty-five percent higher than those companies with no female directors at the beginning of the period.

(b) In 2014, credit suisse found that companies with at least one woman on the board had an average return on equity of 12.2 percent, compared to 10.1 percent for companies with no female directors. Additionally, the price-to-book value of these firms was greater for those with women on their boards: 2.4 times the value in comparison to 1.8 times the value for boards with no women.

(c) A 2012 University of California, Berkeley study called "women create a sustainable future" found that companies with more women on their boards are more likely to "create a sustainable future" by, among other things, instituting strong governance structures with a high level of transparency.

(d) Credit suisse conducted a six-year global research study from 2006 to 2012, with more than two thousand companies worldwide, showing that women on boards improve business performance for key metrics, including stock performance. For companies with a market capitalization of more than ten billion dollars, those with women directors on boards outperformed shares of comparable businesses with all-male boards by twenty-six percent. This report included the following findings:

(i) There has been a greater correlation between stock performance and the presence of women on a board since the financial crisis in 2008;

(ii) Companies with women on their boards of directors significantly outperformed others when the recession occurred;

(iii) Companies with women on their boards tend to be somewhat risk averse and carry less debt, on average; and

(iv) Net income growth for companies with women on their boards averaged fourteen percent over a six-year period, compared with ten percent for companies with no women directors.

(2) The legislature also finds that more women directors serving on boards of directors will boost Washington's economy and improve opportunities for women in the workplace. However, studies predict that it will take forty or fifty years to achieve gender parity if something is not done proactively. These studies include:

(a) A 2015 study conducted by the United States government accountability office estimated that it could take more than forty years for the numbers of women on boards to match men; and

(b) The 2017 equilar gender diversity index revealed that it will take nearly forty years, until 2055, for the russell 3000 companies nationwide to reach gender parity.

(3) Therefore, the legislature finds that standards for membership of boards need to be set in order to support a strong Washington economy.

NEW SECTION.  Sec. 2. A new section is added to chapter 23B.08 RCW to read as follows:

(1)(a) By December 31, 2020, a corporation must have a minimum of one female director on its board.

(b) By December 31, 2022, a corporation must have a minimum of:

(i) Thirty percent female directors, if its number of directors is twenty or more;

(ii) Three female directors, if its number of directors is ten to nineteen; or

(iii) One female director, if its number of directors is nine or fewer.

(2)(a) By December 31, 2020, the office of the secretary of state must publish on its web site, the number of corporations that have at least one female director.

(b) By June 30, 2021, and annually thereafter, the office of the secretary of state must publish a report on its web site that includes the number of:

(i) Corporations;

(ii) Corporations in compliance with this section during at least one point in the preceding calendar year; and

(iii) Corporations fined under (c) of this subsection.

(c) The secretary of state shall enforce this section and may impose fines on corporations for violations of this section as follows:

(i) Failing to meet the requirements of subsection (1) of this section is punishable by a fine of one hundred thousand dollars for the first violation and three hundred thousand dollars for each subsequent violation.

(ii) Failing to timely file board member information with the secretary of state pursuant to a rule adopted under subsection (4) of this section is punishable by a fine of one hundred thousand dollars.

(iii) Beginning in 2025, and every five years thereafter, the fine amounts listed in (c)(i) and (ii) of this subsection shall increase by ten percent.

(d) Fines imposed under (c) of this subsection shall be deposited into the secretary of state's revolving fund created in RCW 43.07.130.

(3) For purposes of this section, "female" means an individual who self-identifies her gender as a woman, without regard to the individual's designated sex at birth.

(4) The office of the secretary of state may adopt rules to implement this section.

(5) The attorney general may adopt rules to implement this section.

Sec. 3. RCW 23.95.255 and 2017 c 31 s 2 are each amended to read as follows:

(1) A domestic entity other than a limited liability partnership or nonprofit corporation shall, within one hundred twenty days of the date on which its public organic record became effective, deliver to the secretary of state for filing an initial report that states the information required under subsection (2) of this section, as well as information regarding the gender of each of the domestic entity's directors on its board of directors.

(2) A domestic entity or registered foreign entity shall deliver to the secretary of state for filing an annual report that states:

(a) The name of the entity and its jurisdiction of formation;

(b) The name and street and mailing addresses of the entity's registered agent in this state;

(c) The street and mailing addresses of the entity's principal office;

(d) In the case of a registered foreign entity, the street and mailing address of the entity's principal office in the state or country under the laws of which it is incorporated;

(e) The names of the entity's governors;

(f) A brief description of the nature of the entity's business; and

(g) The entity's unified business identifier number.

(3) Information in an initial or annual report must be current as of the date the report is executed by the entity.

(4) Annual reports must be delivered to the secretary of state on a date determined by the secretary of state and at such additional times as the entity elects.

(5) If an initial or annual report does not contain the information required by this section, the secretary of state promptly shall notify the reporting entity in a record and return the report for correction.

(6) If an initial or annual report contains the name or address of a registered agent that differs from the information shown in the records of the secretary of state immediately before the annual report becomes effective, the differing information in the initial or annual report is considered a statement of change under RCW 23.95.430.

(7) The secretary of state shall send to each domestic entity and registered foreign entity, not less than thirty or more than ninety days prior to the expiration date of the entity's annual renewal, a notice that the entity's annual report must be filed as required by this chapter and that any applicable annual renewal fee must be paid, and stating that if the entity fails to file its annual report or pay the annual renewal fee it will be administratively dissolved. The notice may be sent by postal or email as elected by the entity, addressed to its registered agent within the state, or to an electronic address designated by the entity in a record retained by the secretary of state. Failure of the secretary of state to provide any such notice does not relieve a domestic entity or registered foreign entity from its obligations to file the annual report required by this chapter or to pay any applicable annual renewal fee. The option to receive the notice provided under this section by email may be selected only when the secretary of state makes the option available.

Sec. 4. RCW 43.07.130 and 2015 c 176 s 8102 are each amended to read as follows:

There is created within the state treasury a revolving fund, to be known as the "secretary of state's revolving fund," which must be used by the office of the secretary of state to defray the costs of providing registration and information services authorized by law by the office of the secretary of state, and any other cost of carrying out the functions of the secretary of state under Title 11, 18, 19, 23, 23B, 24, 25, 26, 30A, 30B, 42, 43, or 64 RCW.

The secretary of state is authorized to charge a fee for publications in an amount which will compensate for the costs of printing, reprinting, and distributing such printed matter. Fees or fines recovered by the secretary of state under RCW 43.07.120(2), 19.09.305, 19.09.315, 19.09.440, 23.95.260(1) (a)(ii) and (iii) and (d), section 2 of this act, or 46.64.040, and such other moneys as are expressly designated for deposit in the secretary of state's revolving fund must be placed in the secretary of state's revolving fund.

During the 2005-2007 fiscal biennium, the legislature may transfer from the secretary of state's revolving fund to the state general fund such amounts as reflect the excess fund balance of the fund.

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