Securities Regulation Daily CII joins chorus supporting disclosure-based board diversity law
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Tuesday, August 11, 2020

CII joins chorus supporting disclosure-based board diversity law

By Anne Sherry, J.D.

The Council of Institutional Investors supports federal legislation to promote diversity on public company boards through disclosure and SEC studies.

The Council of Institutional Investors urged the leaders of the Senate Banking Committee to pass the Improving Corporate Governance Through Diversity Act of 2019. CII pointed to its recent call to action to ensure "all members of our community are treated fairly and equitably, and structural discrimination is dismantled." H.R. 5084, which would mandate issuer disclosures about diversity and inclusion efforts and direct the SEC to study how to improve board diversity, would be "a small but positive step forward," CII wrote.

The Act passed the House 281-135 in November 2019 and is now in front of the Senate Banking Committee. It would require public companies to disclose in their proxy or information statements (or, if not applicable, in their annual reports) data on the racial, ethnic, and gender composition of the issuer’s board, board nominees, and executive officers; the veteran status of any board member, board nominee, or executive officer; and whether the board has adopted a diversity policy or strategy. The SEC would also report annually to Congress regarding its analysis of the disclosures required under the Act.

The other aspects of the bill would direct the SEC’s Director of the Office of Minority and Women Inclusion to publish best practices. The SEC would also be required to create a Diversity Advisory Group to study how to improve board diversity.

The U.S. Chamber of Commerce and other business groups recently wrote to the Senate Banking Committee heads in support of the Act. Like this coalition, CII cites a recent PricewaterhouseCoopers survey finding that board directors overwhelmingly believe a diverse board enhances the performance of the board as well as the company. CII’s own policies support a diverse board, recommending that nominating committee charters reflect that boards should comprise people of diverse backgrounds, experiences, ages, races, genders, ethnicities, and cultures. The letter states that passage of the bill would "embrac[e] the need for greater racial, ethnic, and gender diversity among public company boards of directors."

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