TheCorporateCounsel.net

October 9, 2014

SEC Chair White: Board Gender Diversity

As has been widely reported, SEC Chair White recently delivered this speech about gender diversity on boards. In her speech, Chair White identified studies demonstrating the positive impacts on company performance associated with women on boards, and regulatory and investor-driven efforts to increase gender diversity. She also expressed her own views about how to effect and accelerate change.

Among the points I found particularly noteworthy were her observation of investor and other stakeholder disappointment in board diversity disclosures in proxy statements and how they should affirmatively react, and her express disagreement with – and response to – those who indicate that the lack of gender diversity on boards reflects the lack of suitable women candidates.

As to the former, she noted the SEC’s board diversity disclosure requirements in Item 407 of Regulation S-K, and then stated:

I do recognize, however, that there is also disappointment about the quality of some of the disclosures that companies provide.  This is a shared responsibility.  Shareholders and interested stakeholders have a responsibility to make it known that this is an issue that is important, that they want more information on what is being done to promote diversity, and, if not enough is being done, what actions they expect to be taken.  There are a number of different avenues to make these views known – from direct engagement with public companies to shareholder proposals asking a company to establish more specific policies and commitments – and I encourage you to use all of them.

As to the dearth of women on boards, she indicated:

It is also important for companies to work harder to identify qualified women to serve on boards.  Some defenders of the status quo still say that there are not enough qualified women to fill board vacancies at higher rates.  I disagree.  There is no shortage of highly qualified candidates.  And if that is the view of any company, its nominating and governance committees should broaden their searches.  The challenge is not a lack of suitable candidates.  There is adequate supply, but, the challenge is creating real and committed demand.

Commissioner Aguilar similarly emphasized the board’s responsibility to actively seek diverse (women and ethnic minority) candidates in his 2010 speech on board diversity.

Chair White also mentioned that, based on survey data, there would be more opportunity in coming years to nominate women candidates due to increasing vacancies resulting from board term and age limit policies and the associated statistics (e.g., EY’s 2013 study indicating that 20% of S&P 1500 board seats are held by directors nearing or exceeding the common board retirement age of 72).

She concluded by noting that to effect real transformative change, investors and other stakeholders would need to seek change from companies, “and those who support this effort need to recognize those companies that are doing things right, and not just those that are not doing enough.”

See also this interesting new Paul Hastings study, which explores the role and influence that stock exchanges globally currently have – and could potentially have – on improving board gender diversity.

Directors Survey: Perceived Impediments to Gender Diversity

In contrast with Chair White’s view – as expressed in her recent speech – that there is no shortage of highly qualified women board candidates, a majority of directors in PWC’s latest annual directors survey indicated that there are no perceived impediments to increasing gender diversity, the balance cited lack of awareness of qualified women candidates as the top impediment to increased board diversity:

In general, what impedes a board’s ability to increase diversity?:*

  • Directors are unaware of many qualified diverse candidates
  • Directors don’t want to change the current board composition to create a position for a diverse candidate
  • There are insufficient numbers of qualified diverse candidates
  • Directors don’t view adding diversity as important
  • Board leadership is not invested in recruiting diverse directors

 

*Results shown from greatest impediment to least impediment

Also noteworthy is the fact that 61% of female directors described gender diversity as very important – compared to only 32% of male directors.

However, note that ISS’s just-released gender diversity report reveals measurable progress – particularly among S&P 500 companies, with women filling nearly 3 of every 10 vacancies so far in 2014, almost double the rate compared with 2008.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– It’s Time to Fix the Very Pale, Very Male Boardroom
– The Risks of Too Much Risk Assessment
– Survey: Challenges with Complying with Internal Control Requirements
– No Link Between Interim CEO Appointment & Company Performance
– Surveys Show Need for Continued Focus on Effective Compliance Programs

 

– by Randi Val Morrison