In his speech titled "Board Diversity: Why It Matters and How to Improve It," SEC Commissioner Luis A. Aguilar indicated there could be improvement in the disclosure provided by companies regarding board diversity, as newly required under the changes to Item 407 of Regulation S-K in late 2009. Commissioner Aguilar's speech focused on three key topics:
- the background and significance of the rule passed in late 2009 by the SEC which requires public companies to disclose how they view diversity with respect to their boards
- the initial disclosures from companies resulting from the rule which went into effect in early 2010
- how the continuing issue of the lack of diversity on corporate boards should be addressed
Commissioner Aguilar stated that the rule stemmed from many investors asking the SEC to provide disclosure about the diversity of corporate boards and a company's policies related to board diversity. As a result of these requests, the SEC adopted a rule to assess a company's commitment to developing and maintaining a diverse board. The rule requires a company to disclose: (1) whether diversity is a factor in considering candidates for nomination to the board of directors; (2) how diversity is considered in that process; and (3) how the company assesses the effectiveness of its policy for considering diversity.
After the rule's enactment in early 2010, while some companies provided useful information, many companies had room for improvement. A great number of companies provided only abstract disclosure, often limiting their disclosure to a brief statement regarding diversity. However, Commissioner Aguilar stated that the new rule requires more information regarding diversity. The Commissioner suggested that in complying with the new disclosure rule, companies should keep in mind that investors requested this disclosure.
As to the future, Commissioner Aguilar offered his advice on what is needed to address the continuing lack of diversity on corporate boards. He suggested the missing piece to improving diversity was the "will to act." The Commissioner encouraged companies to prioritize and implement practices to increase board diversity.