WASHINGTON — Leading Democratic lawmakers urged the Securities and Exchange Commission to speed up its review of a proposal that would require companies to provide more specific details about the diversity of their corporate boards. The proposal, which nine public pension fund administrators submitted to the SEC almost a year ago, encourages the agency to require companies to disclose board nominees’ gender, racial, and ethnic diversity.
In a letter to SEC Chair Mary Jo White, the lawmakers pressed the SEC to act on the proposal without any further delay. Sen. Sherrod Brown (D-OH) and Rep. Maxine Waters (D-CA), the senior Democrats on the Senate Banking and House Financial Services Committees, respectively, led the letter, which was also signed by Sens. Robert Menendez (D-NJ), Jeff Merkley (D-OR), and Cory Booker (D-NJ), and Reps. Marcy Kaptur (D-OH), Carolyn Maloney (D-NY), Tim Ryan (D-OH), Marcia Fudge (D-OH), and Joyce Beatty (D-OH).
The Ohio Public Employees Retirement Systems (OPERS) and eight other public pension fund administrators – including the California Public Employees’ Retirement System and the New York State Common Retirement Fund – submitted their rulemaking petition for more board diversity disclosure on March 31, 2015.
“While we applaud your decision to have SEC staff review OPERS’ petition, we are disappointed with the amount of time the SEC is taking to examine and seek public comment on this important and widely supported proposal,” the lawmakers wrote in their letter to White.
“Investment advisors, shareholders, policymakers, and other stakeholders have been telling the SEC and others for decades now that the diversity characteristics of board nominees and directors is information they need to make informed investment and voting decisions. Similarly, stakeholders have been explaining for decades that enhanced diversity disclosures may promote sociodemographic diversity on corporate boards, which in turn may promote better business strategy and corporate results,” the lawmakers added.
The SEC adopted a rule change in 2009 that required publicly-traded companies to disclose more information on director selection and diversity. In their letter, the lawmakers outlined the new rule’s limitations, noting that companies have taken a variety of different approaches to disclosing board nominees’ qualifications and skills. And since the rule does not define diversity, the lack of a standard makes it difficult for shareholders and investors to make informed decisions when voting for directors.
To strengthen the quality of disclosures, the rulemaking petition encourages the SEC to require companies to indicate in a chart or matrix the qualifications, skills, and racial and gender composition of their board nominees.
“Such a requirement, with minimal burden and cost on companies, would aid in everyone’s understanding, including the SEC’s understanding, of each company’s approach,” the lawmakers wrote.
Women, who make up half the American workforce, hold just 16 percent of seats on corporate boards, and it could be decades before the gender gap in boardrooms closes, according to a recent Government Accountability Office report. The report, which Rep. Maloney requested in May 2014, found that it may take 40 years or more to reach a 50-50 gender balance on corporate boards.
