January 25, 2016

SEC Urged to Expand Board Nominee Diversity Disclosure

In response to this new GAO report on board gender diversity, Rep. Carolyn Maloney (D-NY) sent a letter to SEC Chair White earlier this month urging amendments to the proxy statement rules to require that companies disclose each board nominee’s gender, race, and ethnicity – as was proposed by nine large public pension funds in a March 2015 petition to the SEC.

That petition seeks this amendment to Item 407(c)(2)(v) of Regulation S-K (proposed new text underlined):

Describe any specific minimum qualifications that the nominating committee believes must be met by a nominating committee-recommended nominee for a position on the registrant’s board of directors, and describe any specific qualities or skills that the nominating committee believes are necessary for one or more of the registrant’s directors to possess. When the disclosure for this paragraph is presented in a proxy or information statement relating to the election of directors, these qualities, along with the nominee’s gender, race, and ethnicity should be presented in a chart or matrix form.

The petitioners describe the current diversity disclosure requirement (Item 407(c)(2)(vi)) of Regulation S-X) as inadequate to determine racial and ethnic and even gender diversity in certain cases, but view it as complementary to their suggested approach.

Here are the key findings of the GAO study, which was prompted by Rep. Maloney’s request in May 2014:

  • In 2014, women comprised about 16% of board seats in the S&P 1500 – up from 8% in 1997
  • Even if equal proportions of women and men joined boards each year beginning in 2015, it could take more than four decades for women’s representation on boards to be on par with that of men’s.
  • Even if every future board vacancy were filled by a woman, the GAO estimated that it would take until 2024 for women to approach parity with men in the boardroom.
  • The GAO identified various factors that may hinder women’s increased representation among directors. These include boards not prioritizing recruiting diverse candidates; few women in the traditional pipeline to board service—with CEO or board experience; and low turnover of board seats
  • Most stakeholders interviewed supported improving SEC disclosure requirements on board diversity.
  • The U.S. lags behind other industrialized nations, including Australia, Canada, the UK, Germany and Norway – where serious, concerted efforts have been made to address discrimination against women in the board room.

Among the potential strategies identified in the report for increasing board gender diversity in addition to expanded disclosure requirements are:

– Requiring a diverse slate of candidates to include at least one woman
– Setting voluntary diversity targets
– Expanding board searches beyond the traditional pool of CEO candidates
– Expanding board size to include more women
– Adopting term or age limits to address low turnover
– Conducting board performance evaluations

Rep. Maloney is a senior member of both the House Financial Services Committee (where she serves as Ranking Member of the Subcommittee on Capital Markets) and House Oversight and Government Reform Committee, and Ranking House member of the Joint Economic Committee.

See the GAO’s Report Highlights, these Bloomberg and Washington Post articles, and this Canadian Business article: How to Make Corporate Boards More Diverse.

Webcast: “Pat McGurn’s Forecast for 2016 Proxy Season”

Tune in tomorrow for the webcast – “Pat McGurn’s Forecast for 2016 Proxy Season” – when Davis Polk’s Ning Chiu and Gunster’s Bob Lamm join Pat McGurn of ISS to recap what transpired during the 2015 proxy season and what to expect for 2016. Please print this deck in advance…

The SEC is closed today due to the weekend snow storm. See Broc’s earlier blog for the filings impact.

Fortune 1000 Companies Increase Board Gender Diversity

Board gender diversity improved among Fortune 1000 companies on the 2020 Women on Boards’ recently released 2015 Gender Diversity Index. The GDI’s 842 companies consist of the Fortune 1000 companies that remain active since the organization’s tracking began in 2011 based on the 2010 Fortune 1000 list.

Key findings of this year’s report include:

  • Women now hold 18.8% of board seats – an increase from 17.7% in 2014 and 14.6% in 2011. This compares to 17.9% of board seats on the 2015 Fortune 1000 list – a lower percentage than the GDI Index due to the fact that the majority of new companies are smaller and smaller companies have less gender diverse boards, as well as the fact that companies that drop off the GDI (due to, e.g., M&A, bankruptcy) tend to have one or no women.
  • Women gained 75 board seats in 2015 – an increase from 52 board seats gained in 2014.
  • Number of Winning “W” Companies (greater than 20%) has increased to 45%, compared with 40% last year. The number of Zero “Z” Companies (no women) continues to decline, to 9% this year, compared with 11% in 2014.
  • Percentage of women on boards has increased in all sectors, but five sectors have increased to over 20%: Consumer Defensive, Financial Services, Healthcare, Technology, and Utilities.

See also this infographic, and oodles of additional benchmarking and other resources in our “Board Diversity” Practice Area.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog – for 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:

Director Exit Interviews
Data Breach Derivative Suit Protection: Action Items
How to Calmly Effect Emergency Succession
Non-GAAP Disclosure Compliance Tips
Redefining the Board’s Role in Strategic Planning


– by Randi Val Morrison