Last week, SEC Commissioner Luis Aguilar said that women and minorities remain “woefully underrepresented” on corporate boards, despite numerous studies that show “diversity in the boardroom results in real value for both companies and shareholders.”
Despite the best of corporate intentions over many years, the SEC adopted a new rule, which began applying to proxy solicitations on February 28, requiring a company to disclose:
- whether diversity is a factor in considering candidates for nomination to the board of directors;
- how diversity is considered in that process; and
- how the company assesses the effectiveness of its policy for considering diversity.
Recently, the SEC completed a review of the filings it received and found a broad spectrum of compliance with the rule. Some companies have done a very good job, others have room for improvement, and still others provided only a brief statement indicating that diversity was something considered as part of an informal policy.
The SEC has now begun to act on the continuing lack of board diversity, and Commissioner Aguilar suggests that companies prepare disclosure with an eye toward it being useful to investors – especially since the rule was originally adopted at investors’ requests. Specifically, he recommends that the disclosure indicate whether the company has a policy of:
- interviewing one or more candidates who are a minority and/or a woman;
- retaining a search firm that has been specifically instructed to seek candidates who are minorities and/or women; and/or
- soliciting recommendations from organizations that have a reputation for identifying candidates with diverse backgrounds.
The SEC also recommends that the company indicate how many candidates were interviewed who were women and/or minorities and highlight the diversity of the existing board of directors.
Board diversity is an issue that has stimulated much discussion, but with not enough results. Given its importance, it’s time for businesses to make board diversity a priority.
— PondelWilkinson, firstname.lastname@example.org