Securities Law Blog

In our February 12, 2016 blog post, we reported on SEC Chair Mary Jo White’s announcement that her office was reviewing the agency’s current disclosure rules with respect to diversity of public company boards of directors.  In delivering the keynote address at the International Corporate Governance Network Annual Conference on June 27, 2016 via videoconference, SEC Chair White reiterated the importance of board diversity to her personally and reported that the SEC staff is preparing a recommendation to the SEC to propose amending the current proxy rule with respect to board diversity as set forth in Item 407(c)(2)(vi) of Regulation S-K, which has been in effect since 2009, to require companies to include in their proxy statements more meaningful board diversity disclosures on their board members and nominees where that information is voluntarily self-reported by directors.

As SEC Chair White explained in her keynote speech, while the SEC does not have the authority to mandate board diversity, it does have a say over how much information companies disclose about their diversity efforts. With respect to the impact of the existing diversity disclosure rule, SEC Chair White stated that reporting has generally been vague and has changed little since the rule was adopted.  She further explained that a growing number of companies have recently begun to voluntarily provide more detailed information in their proxy statements regarding board diversity, including an analysis of data, accompanied by pie charts and bar graphs, to describe the state of the board’s gender, race and ethnic diversity composition, which more specific information she believes is more useful to investors. Based on the voluntary disclosures she has seen, SEC Chair White stated that it appears that it would not be difficult for companies to prepare disclosures that would include more meaningful disclosure regarding diversity for investors.

As we stated in our February blog post, it may take some time before new disclosure rules are implemented. However, the issue clearly is unlikely to go away, and issuers should be prepared to provide additional information in their SEC filings about the composition of their board in the near future.