Legal Commentary

SEC Mandate on Reporting Corporate Board Diversity







In December, the Securities and Exchange Commission approved a rule to require more information for shareholders about the makeup of leadership in public companies. Disclosure of diversity considerations in hiring directors will be required for proxy and information statements. See SEC Press Release http://www.sec.gov/news/press/2009/2009-268.htm . Although reporting cannot steer behavior on its own, the SEC recognizes that this reporting requirement may induce ?beneficial changes in board composition,? particularly since many scholars and commentators have pointed to the importance of diversity for investors and even the connection between diverse boards and ROE.







It is striking that the SEC left it up to the companies to decide how to define diversity. This is a marked contrast with Norway?s 2008 Corporate Board Quota, which requires publicly-listed corporations in Norway repopulate their boards to include at least forty percent of the minority gender (that is to say women, for now), with noncompliance leading to delisting from the exchange and dissolution. My article Feminizing Capital: A Corporate Imperative, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1430508 , explores the theoretical bases and impacts of this groundbreaking law. The SEC?s new rules are significant when our current economic crisis has exposed a lack of ethical leadership in the corporate world and the need for an influx of new ideas. As women become the majority of the workforce, gendered understandings of economic relations have surfaced. (See my op-ed piece with Melissa Murray on this issue: http://articles.sfgate.com/2009-05-19/opinion/17202600_1_gi-higher-education-jobs ) Norway?s bold step has been copied elsewhere in Europe as more countries realize the need to diversify the private sector.







The disparity between women?s majority workforce status and their paltry 10% of corporate boards exposes a highly gendered economic structure. Norway?s law, albeit through a draconian process, attempts to remedy this. The SEC?s decision to mandate diversity reporting is a step in the right direction.