Michigan Senate Bill SB0242

Michigan 2023-2024 Regular Session

• Introduced: 3/23/23
• Refer: 3/23/23

Caption

Businesses: business corporations; certain number of female board members on board of directors; require. Amends sec. 1002 of 1972 PA 284 (MCL 450.2002) & adds sec. 505a.

Impact

The implications of SB0242 are significant in reshaping the corporate landscape in Michigan. It aims to tackle the gender imbalance at the highest levels of corporate governance by requiring companies to consider female candidates for board positions. In turn, the bill is designed to help foster greater gender equality and improve decision-making by ensuring that diverse perspectives are included in leadership roles. However, this can result in friction with existing corporate practices and norms, as businesses may need to alter their traditional criteria for selecting board members.

Summary

Senate Bill 242, also referred to as SB0242, amends the Business Corporation Act of 1972 to require publicly held corporations in Michigan to increase the representation of female directors on their boards. The bill mandates that starting January 1, 2024, all publicly held domestic and foreign corporations that have principal executive offices in Michigan must have at least one female director. By January 1, 2026, the requirements become more stringent based on the number of total directors: corporations with six or more directors must have at least three female directors, those with five directors must have at least two female directors, and corporations with four or fewer directors must have at least one female director.

Contention

The bill has garnered both support and criticism. Proponents argue that it is a necessary step toward promoting gender equality in the corporate world, pointing to studies suggesting that companies with diverse boards perform better. Critics, however, raise concerns about government overreach into corporate governance, claiming that board composition should be left to the discretion of the shareholders rather than being mandated by state law. Additionally, there are apprehensions about the potential administrative burden on companies in terms of compliance and data reporting, as they would be required to disclose information about their board composition regularly.

Administrative provisions

SB0242 establishes a compliance reporting structure which mandates the Michigan administrative office to publish annual reports. These reports will document the compliance levels of corporations with the new regulations and will track movements of corporate headquarters in and out of Michigan. The bill also includes penalties for non-compliance, with fines scaling from $100,000 for initial violations to $300,000 for subsequent infractions.