On March 2, 2016, a number of U.S. Senate and House members sent a letter to SEC Chair Mary Jo White urging the Commission to speed-up its review of a rulemaking petition that would require increased disclosures regarding corporate board diversity.
The letter, spearheaded by Senator Sherrod Brown and Representative Maxine Waters, each ranking members of the Senate Committee on Banking, Housing, and Urban Affairs, and the House Financial Services Committee, respectively, contends that the SEC’s rule changes in 2009 requiring board diversity disclosures are ineffective. Rather, the requirements regarding minimum director qualifications, specific qualities or skills that at least one director must possesses, and whether the board considers diversity in identifying board nominees, fall “short of providing stakeholders with the information they need on board diversity.” Especially problematic, the letter notes, is the lack of a diversity definition in the regulations. These requirements–if the reader is interested–may be found in Item 407(c)(2)(v)-(vi) of Regulation S-K.
The rulemaking petition to which the letter refers was submitted by nine public pension fund administrators on March 31, 2015. Collectively representing around $1.12 trillion in assets, the petition drafters desire a requirement that public companies include in their proxy statements and reports a chart or matrix that visually depicts the company’s approach to director qualifications and skills. The petition specifically proposes adding the following sentence to the end of Item 407(c)(2)(v):
When the disclosure [regarding director qualifications] 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.
Perhaps the lawmakers’ letter will spur the SEC into action regarding this rulemaking petition. Stay tuned for more dodd-frank.com coverage on this topic.