Board Diversity Advocates Aren’t Giving up on Disclosures (Corrected)

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By Andrea Vittorio

Board diversity advocates are hoping to keep the Securities and Exchange Commission’s attention on an issue that has gotten support from both investors and companies.

Mary Jo White teed up a potential proposal asking companies to provide more details about the diversity of their directors not long before she stepped down as chair of the SEC. White, who was a director at Nasdaq before becoming a regulator, said she saw firsthand how more diverse boardrooms function better and are linked to better company performance.

Now that she’s gone, an SEC advisory committee has kept the conversation alive with a recent recommendation to the commission on how to expand diversity disclosures.

Among those that have put pressure on the commission to act are nine of the nation’s largest pension funds, who petitioned for additional reporting requirements in 2015. “It would be surprising to me if the SEC didn’t move forward,” because director diversity is “a rare instance” where investors and companies agree, said Anne Simpson, investment director of sustainability at the California Public Employees’ Retirement System.

The Business Roundtable, a trade association for chief executives of U.S. companies, endorsed diversity and its benefits for board effectiveness and long-term shareholder value in the latest version of its governance principles. The CEOs of BlackRock Inc., JPMorgan Chase & Co. and other large corporations have also said boards with diverse skills, backgrounds and experience make better decisions.

“Companies which are selling to diverse communities, recruiting from diverse communities and developing products for diverse communities are going to be better served when they have the insight of people who are diverse,” Simpson told Bloomberg BNA.

But support for diversity doesn’t necessarily translate into support for disclosures about diversity.

Diversity Disclosures

“Anyone you ask is going to say, ‘oh yeah we all want diverse boards, management teams, etc.,’ but there’s always a but,” said Fenwick & West LLP’s Stephen Graham, who co-chairs the SEC advisory committee that sent the recommendation. The “but” revolves around concerns that social policy is not part of the commission’s business, he told Bloomberg BNA.

Companies are already required to say whether, and if so, how they consider diversity when assessing director candidates. The committee says those disclosures are generally vague and unhelpful to shareholders, employees and customers.

Under the committee’s recommendation, companies would also need to report on how diverse their boards are. Just under 13 percent of S&P 500 companies voluntarily disclosed data about directors’ race or ethnicity in their most recent proxy statements, according to research from executive data provider Equilar Inc.

Additional disclosure requirements aren’t likely to be a priority for the SEC in the near term, given its current state of understaffing and its acting chair’s current focus on reworking Dodd-Frank rules, Equilar’s director of content Dan Marcec said. Still, pressure from shareholders and others means “this issue isn’t going anywhere,” he told Bloomberg BNA.

Marcec said investors who think the commission isn’t moving quickly enough “could take matters into their own hands,” as some already have. This year, shareholders have filed resolutions pushing for board diversity at companies such as Costco Wholesale Corp. and Johnson & Johnson.

HP Inc., MetLife Inc. and PepsiCo Inc. are among those with the most diverse boards in the Fortune 500, according to a 2016 census from the Alliance for Board Diversity and Deloitte.

The census shows that women and minorities have made gains in the boardroom since 2012, but the pace of progress is slow. At the current rate, it would take until 2026 for women and minorities to make up 40 percent of Fortune 500 board seats.

“There was one time in my life when I probably knew every woman and every person of color who served on a board because there were that few people,” said J. Veronica Biggins, who became one of the nation’s highest ranking women in banking during her 20 years at NationsBank (now Bank of America). Biggins, who went on to direct presidential personnel in the Clinton White House, now leads the board practice at executive search firm Diversified Search.

“We’ve certainly come a long way, as far as boards are concerned,” she told Bloomberg BNA. “But do we have a long way to go? Certainly.”

Some countries, including France and Italy, have used government-enforced gender quotas to quickly increase the share of women on boards.

Defining Diversity

In the U.S., disclosure is the most likely regulatory approach, said Brande Stellings, who works to advance boards’ gender diversity through the nonprofit Catalyst. “There’s a real power in just asking the question,” Stellings told Bloomberg BNA.

The hard part is defining diversity. While the definition is left up to each company, the recommendation to the SEC specifically asks for disclosure on race, gender and ethnicity.

“That doesn’t really take into account other factors and aspects of diversity that are critical for a high-performing board,” such as age or perspective, Erin Essenmacher, chief programming officer for the National Association of Corporate Directors, told Bloomberg BNA.

Despite talk about the need for getting younger people on boards, the typical director at an S&P 1500 company has actually gotten older, climbing from an average of 60.5 years in 2008 to 62.5 years in 2016, research commissioned by the Investor Responsibility Research Center Institute shows. Boards are however starting to look beyond traditional skillsets, like CEO experience, when refreshing themselves, which the study says could open seats up to a wider pool of nominees.

“Once you start expanding the pool of where you’re looking for board members,” then diversity follows, Essenmacher said.

(Corrected to clarify Essenmacher's comments.)

To contact the reporter on this story: Andrea Vittorio in Washington at

To contact the editor responsible for this story: Yin Wilczek at

For More Information

The committee's recommendation to the SEC is available at

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