As we previously reported in our Client Update dated May 22, 2019, the Illinois House of Representatives and Illinois Senate were both considering separate bills that would have required subject corporations’ boards of directors to include at least one female and one African American director by December 31, 2020. The Senate bill also would have required corporate boards to include at least one Latino director by the same date. Both the House bill and Senate bill would have imposed financial penalties for non-compliance. However, the bill passed by the Illinois legislature only requires subject corporations to file annual diversity statistics with the Illinois Secretary of State. These diversity reporting requirements are described below.
Demographic Diversity Reporting Requirements
The final legislation will require each foreign1 or domestic public corporation whose principal executive office is located in Illinois (collectively, “Subject Companies”) to disclose in its annual report filed with the Illinois Secretary of State the following information:
■ Information on the specific qualifications, skills and experience that the corporation considers for its board of directors, nominees for the board of directors and its executive officers.
■ The self-identified gender of each member of its board of directors.
■ Whether each member of its board of directors self-identifies as a minority person and, if so, to which race or ethnicity the member belongs.2
■ A description of the corporation’s process for identifying and evaluating nominees for its board of directors, including whether and, if so, how demographic diversity is considered.
■ A description of the corporation’s process for identifying and appointing executive officers, including whether and, if so, how demographic diversity is considered.
■ A description of the corporation’s policies and practices for promoting diversity, equity and inclusion among its board of directors and executive officers.
The legislation requires that Subject Companies include the demographic diversity information in annual reports no later than January 1, 2021.
Surprisingly, the Illinois legislature could not muster majority support for either the House bill or the Senate bill with the diversity mandate included, despite the fact that Democrats hold a super-majority in both legislative chambers and Illinois’ newly elected governor is a Democrat. The detailed diversity statistics under the new legislation are intended to aid Illinois legislators in drafting future policy solutions to eliminate the disparate representation of women and minorities on corporate boards. Illinois Governor J.B. Pritzker could sign the bill into law as early as this month.
1 A foreign corporation is a corporation organized under the laws of another jurisdiction (including non-U.S. jurisdictions) that qualifies to transact business in Illinois.
2 Racial and ethnic identifies are specified and defined in the statute.
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The Client Update is prepared by Meridian Compensation Partners’ Governance and Regulatory Team led by Donald Kalfen. Questions regarding this Client Update or executive compensation technical issues may be directed to Donald Kalfen at 847-235-3605 or firstname.lastname@example.org.
This report is a publication of Meridian Compensation Partners, LLC, provides general information for reference purposes only, and should not be construed as legal or accounting advice or a legal or accounting opinion on any specific fact or circumstances. The information provided herein should be reviewed with appropriate advisors concerning your own situation and issues.