NORWAY GENDER REPRESENTATION ON COMPANY BOARDS

Representation of both sexes on company boards

Background

* In December 2003 the Norwegian Parliament passed an amendment to the Public Limited Companies Act with reference to Ot.prp. nr. 97 (2002-2003), stating that public limited companies establishing a demand for gender balance in the companies' boards. The legislation was adopted by a large majority of the Parliament, only one party voted against.
* By doing so, Norway was the first country in the world to demand gender balance within the boards of public limited companies.
* According to an agreement between the previous Government and the private business sector, the rules applying to private companies should not come into effect if the desired gender representation was achieved voluntarily by 1 July 2005. A survey carried out by Statistics Norway, showed that by 1 July 2005 Norway had 519 public limited companies in the private sector. Only 68 (13,1 per cent) of these companies fulfilled all the demands laid down by the law. 16 per cent of the board members were women.
* The rules applying to state-owned companies entered into force on 1 January 2004, and the rules regarding privately owned public limited companies entered into force 1. January 2006. There was a normal transitional period of two years from 1 January 2006 for companies registered prior to that date. This means that the public limited companies had to comply with the rules before 1. January 2008. Companies that were not registered by 1 January 2006, had to fulfil the demands to be registered.

Present situation - public limited companies

* In April 2008 it was clear that none of the public limited companies would be dissolved
* A Press Relase from the Brønnøysund Register Centre dated 22 February 2008, states that 12 public limited companies will receive a second 4 weeks notice with public announcement.
* You may find the press release (only in Norwegian) and the list of companies here
* Numbers from Statistics Norway, shows that by February 19th 2008, 39 per cent of the board representatives in public limited companies, were women. 93 per cent of the 459 public limited companies fulfilled the requirements on representation of both sexes laid down in the Public Limited Companies Act.
* In January 2008, 77 public limited companies had failed to comply with the gender representation rules. These companies have received a letter from the Brønnøysund Register Centre, giving them 4 weeks notice to comply with the rules. The deadline for these companies was in the middle of February.
* If the companies fail to fulfil the demands within the time limit, the notice will be reiterated by public announcement and the companies will be given a second 4 weeks notice to comply with the rules. After this, the case will be submitted to the court, who will dissolve the company.


Why gender representation rules?

* Reaching a balanced participation is a question of democracy.
* The Government regards the legislation on women in boards as an important step towards equality between the sexes, a fairer society and a more even distribution of power, and as an important factor in the creation of wealth in society.
* The legislation will secure women's influence in decision making processes of great importance for the economy in the society.
* This legislation is also important for the Norwegian economy.
* In Norway, there are a high number of women in paid work, and Norwegian women are also highly educated. For several years, more women then men have finished a higher education. Almost 65 per cent of the students at universities and university colleges are women. 50 per cent of the law school graduates are women, so are 40 per cent of the MBA-graduates, approximately 70 per cent of the graduates from the Veterinary College, the School of dental surgery and the psychology graduates. Almost 60 per cent of Medical School graduates are women. Despite the fact that an increasing number of women has finished a higher education, the number of women on company board remained small.
* The Government takes seriously that half the competence that companies need to maintain position in international competition is found among women. The problem was not that Norwegian women were not qualified. The problem was to recruit highly qualified women to board positions and make use of their competence. This legislation make men in leading positions see and experience that women also can do the job.
* The demand for gender balance in company boards also secures that we make use of all the human resources in our country, not just half of it.
* Some surveys also indicate that diversity has a positive impact on the companies' bottom line. Recruiting more women to the boards will increase the diversity, and thereby influence on the bottom line.


What companies are affected?

* The legislation on representation of both sexes in boards implies for all publicly owned enterprises (state-owned limited liability and public limited companies, state-owned enterprises, companies incorporated by special legislation and inter-municipal companies) and all public limited companies in the private sector. As for the public limited companies, the rules are found in the Public Limited Companies Act section 6-11a.
* There are approximately 500 public limited companies in Norway.
* No rules have been proposed for privately owned limited liability companies because most of these companies in Norway are small family enterprises and the owners are themselves members of the board. Public limited companies normally have a broader spread of shares and less personal involvement in the management. Norway has approximately 205 000 limited liability companies.
* In May 2007 the Parliament passed a new law regarding co-operatives. According to this legislation, co-operatives with more than 1000 members, are obliged to have a representation of both sexes in their boards. There are approximately 4000 co-operatives in Norway.


Recruiting women

* To make women's competence more visible, different databases have been developed. In these databases, women who are interested in being a member of a board can register, and companies that are looking for someone to a board, can look for qualified women.
* You may find links to the data bases here


What does the law say?

o The requirement of the gender representation law is that both sexes shall be represented on company boards as follows:
+ If the board has two or three members, both sexes must be represented
+ If the board has four or five members, each sex shall be represented by at least two representatives
+ If the board has six to eight members, each sex shall be represented by at least three representatives
+ If the board has nine members, each sex shall be represented by at least four representatives, and if the board has more than nine members, each sex must make up at least 40 per cent of the representatives.
o These rules also apply to the election of alternates.
o There are special requirements for employee representatives:
+ Where two or more board members are elected from among the employees, both sexes must be represented. This also applies to alternates.
+ This rule will not be applicable in companies where one of the genders represents less than twenty per cent of the total number of employees on the date of the election.
o The rules regarding representation of both sexes is to be applied separately to employee-elected and shareholder-elected representatives in order to ensure independent election processes.


Enforcement

* No new laws regarding enforcement have been passed.
* Company legislation already provides for the enforcement of the rules regarding the composition of the board. The rules regarding gender representation will have a natural place in these provisions. This requirement will be enforced through the normal control routines followed by the Brønnøysund Register Centre (www.brreg.no). Under these rules, the Brønnøysund Register Centre will refuse to register a company board, if its composition does not meet the statutory requirements, just as it refuses registration if the chief executive officer or auditor does not fulfil the legal conditions. A company which does not have a board that fulfils the statutory requirements may be dissolved by order of the court.
* Dissolution has been a part of the legal system since 1977, in almost 30 years. Experience shows that most companies where discrepancies are pointed out, correct these in due time. Therefore, it is unlikely that any companies will be dissolved by the court on account of the gender representation rule.
* According to the Public Limited Companies Act, the Ministry of Trade and Industry may decide that a forced dissolution shall not be executed because of "substantial public interests". In such cases, the company will have to pay a compulsory fine until the conditions are in accordance with the law. This regulation applies to different situations such as requirements regarding the board of directors, the general manager, the auditor and the annual accounts.


Source: http://www.gender.no/News/4588