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Democratic lawmakers want the Securities and Exchange Commission to follow through on suggested improvements to corporate disclosures on board diversity.
Shortly before Mary Jo White stepped down as the SEC’s chairman, she asked the staff to review reporting requirements with an eye toward seeking more details on directors’ diversity. Now Rep. Gregory Meeks (D-N.Y.) and 28 of his peers in the House are calling on the commission’s new chairman to finish the work she started.
“The SEC’s corporate board diversity rule is broken,” Meeks said in a statement May 25. “Although many companies have complied with the spirit of the law, many other companies fall short of providing valuable information to investors regarding their boards’ racial, ethnic, and gender composition.”
Director diversity is a topic investors are increasingly vocal on because they say it can help boards better manage risk by avoiding groupthink and has been linked to better company performance. Diversity and its benefits for boards have also been highlighted by the chief executive officers of JPMorgan Chase & Co. and Berkshire Hathaway Inc., as well as those at BlackRock Inc. and Vanguard Group.
White, who was a director at Nasdaq before becoming a regulator, has lamented the lack of boardroom diversity in the U.S. Only about 20 percent of S&P 500 board seats are held by women and just 14 percent are held by minorities, according to a recent study commissioned by the Investor Responsibility Research Center (IRRC) Institute.
The SEC can’t “mandate board diversity,” White said in a speech last June, but it can make companies provide more meaningful disclosure on it. After she asked staff to look into diversity disclosures, an SEC advisory committee kept the conversation alive with a February recommendation to the commission.
Companies are already required to say whether, and if so how, they consider diversity when assessing director candidates. Under the committee’s recommendation, companies would also need to report on how diverse their boards are.
As staff turns over with the new administration, the SEC hasn’t yet responded to that recommendation, the advisory committee’s co-chair Sara Hanks told Bloomberg BNA. An SEC spokesperson declined to comment on whether the commission is considering it or if it plans to move forward with a proposal.
When current SEC Chairman Jay Clayton was asked after his Senate nomination hearing in March if he would continue White’s efforts to improve corporate reporting on board diversity, he pledged to “monitor” the issue. “I believe diversity has value, including at public companies and their boards,” Clayton wrote in response to questions on the subject from three senators.
Clayton should go beyond “mere monitoring” and work on a proposal, Meeks and other lawmakers, including Reps. Maxine Waters (D-Calif.) and Carolyn Maloney (D-N.Y.), said in a May 24 letter.
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