In our last issue of the Business Law Quarterly, we summarized the findings of a Canadian Institute of Chartered Accountants (CICA) report dealing with diversity among boards of directors and emphasized the strategic importance for all organizations to build diversity into their organizations. In this issue, we draw your attention to a recent speech by U.S. Securities and Exchange Commissioner Luis Aguilar, who spoke frankly about the lack of diversity in the corporate boardroom and within government agencies.
Commissioner Aguilar indicated that though "diversity" can mean many things, he was speaking specifically about gender and ethnicity. There is strong evidence to support that having a diverse board brings about real economic benefits. Also, investors are increasingly concerned about the efforts of companies to increase the diversity of their boards, as the marketplace itself is becoming more diverse and as business becomes more globalized.
In response to overwhelming investor interest in learning about the efforts of companies to become more diverse, the Securities and Exchange Commission (SEC) adopted a rule, which came into effect in February 2010, to assess a company’s commitment to developing and maintaining a diverse board. The rule requires a company to disclose whether diversity is a factor in considering candidates for nomination to the board of directors, how diversity is considered in that process and how the company assesses the effectiveness of its policy for considering diversity. Some companies are doing well, and others could be doing better. It’s a first step in an important dialogue between investors and companies.
Commissioner Aguilar emphasized that diversity improvements are needed elsewhere — within government agencies and among financial market participants. He notes that in 2009, of the SEC’s senior officers, 89 per cent were white, four per cent African-American, three per cent Hispanic and two per cent Asian. Of this group, 67 per cent were males and 33 per cent were females. Under the Dodd Frank Act, the SEC will be establishing a new Office of Minority and Women Inclusion with responsibility for all matters relating to diversity in management, employment and business activities of the agency.
As we have previously indicated, there are compelling reasons to increase the level of diversity within your own organizations. Diversity in the boardroom is a topic of growing interest, and we expect to hear much more about it in the future.