Rep. Maloney Emphasizes Importance of Increasing Diversity on Corporate Boards
WASHINGTON, DC – Congresswoman Carolyn B. Maloney (D-NY), senior member of the House Financial Services Committee, spoke today at the Committee’s business meeting in support of H.R. 1277, the Improving Corporate Governance Through Diversity Act of 2021, which passed out of the committee by a voice vote. This bill includes provisions from her Diversity in Corporate Leadership Act and would help increase diversity on corporate boards by requiring public companies to annually publish diversity data including the racial, ethnic, and gender composition of their board of directors, nominees for the board of directors, and executive officers.
H.R. 1277 is supported by numerous organizations including the American Bankers Association, Bank Policy Institute, Financial Services Forum, Nareit, The Real Estate Roundtable, Retail Industry Leaders Association, and the U.S. Chamber of Commerce.
You can watch the Congresswoman’s remarks here and a transcript is below.
“I want to start by thanking Chairwoman Waters for moving this bill, and for making diversity a top priority for this committee.
“We show our priorities by our actions, and this committee is not just talking about diversity, we are acting on legislation to improve diversity – diversity in our banking system, diversity at the Federal Reserve, and diversity in corporate board rooms.
“I want to thank my very good friend and colleague Mr. Meeks, the sponsor of this legislation. He and I have been working on this issue a long time, and I thank him for his leadership, and I am so proud to be an original cosponsor of this bill.
“The goal of the ‘Improving Corporate Governance Through Diversity Act’ is extremely important — increasing diversity on corporate boards.
“This is something I believe in passionately, and while we’ve made great progress, we still have a long way to go.
“One of the key pieces of this legislation, I believe, is getting more women, and minorities, and individuals from historically underrepresented communities in corporate leadership positions. Leaders set the tone, and they set the priorities.
“Back in 2015, I asked the Government Accountability Office to look at the gendered makeup of corporate boards — and the results of the GAO study convinced me that we need to do more.
“Women make up roughly 47% of the workforce, and yet they hold roughly 29% of board seats at the Fortune 500 companies.
“The most startling finding in the GAO report was how long they projected it will take to achieve gender parity on corporate boards. The GAO found that even if we assume that equal proportions of women and men starting joining boards starting right now it would take more than 40 years for there to be an equal number of women and men on the corporate boards.
“So clearly, something needs to change.
“So let’s be clear: increasing diversity on corporate boards is not a social issue — it’s good business too.
“Study after study has shown that companies with greater gender, racial, and ethnic diversity on their boards perform better financially.
“McKinsey found that companies with the highest racial diversity on their boards were 33% more likely to have above-average profitability. A study by Credit Suisse found that companies with at least one woman on the board — just one! — outperformed at competitors by 3.5% [per year] for the last decade.
“With these kinds of numbers, investors actually want the companies they invest in to increase the diversity of their boards.
“This legislation would help investors accomplish this by requiring public companies to report the racial, ethnic, and gender composition of their boards and executive officers in their annual proxy statement. The GAO found that this one very simple metric is actually very important to investors.
“And by putting this information in one place for investors — without requiring them to go look at pictures of board members, or guess the gender, race, or ethnicity of board members based on their names — the bill would help investors to quickly sort the companies that do and do not have diverse boards.
“The legislation would also establish a Diversity Advisory [Group] at the SEC, which would study strategies to increase gender, racial, and ethnic diversity on corporate boards.
“Because the truth is that making meaningful progress on board diversity is going to require a range of different policies in addition to the improved disclosures in this legislation.
“There is no magic bullet, but we’re still trying to identify the most effective policies to increase diversity on corporate boards. So the Diversity Advisory Group at the SEC would continue to study these issues, and would continue to make recommendations about the best policies in the future.
“It’s important to note that this legislation would NOT be burdensome for companies — we have worked closely with the business community in this effort, and it’s even supported by the Chamber of Commerce.
“I want to take this time to join my colleague Alma Adams in congratulating Nasdaq for, on their own, taking the steps to do what this legislation calls for – revealing who are on the boards in their reports, and in their filings, and in their disclosures for Nasdaq. So we’re moving in the right direction, this bill passed last year—I believe it will pass again. I urge my colleagues to support this bill, and I yield back.”
In February 2016, Congresswoman Carolyn B. Maloney unveiled a report from the Government Accountability Office showing that women are severely underrepresented on corporate boards, taking up just 16 percent of seats in the boardroom. The study, which Maloney requested in May 2014, shows that even if the rate of women joining corporate boards were doubled, so they were hired at the same rate as men, it would still take at least 40 years (2056) for women to reach parity.
In response to these findings, the Congresswoman introduced legislation to require the Securities and Exchange Commission to update its diversity disclosure requirements, by requiring companies to report their strategies for recruiting more women into top corporate positions, both on boards and in senior management, and also urge corporations to develop strategies to achieve gender parity more quickly. These provisions are incorporated into the Improving Corporate Governance Through Diversity Act.
The Improving Corporate Governance Through Diversity Act will:
- Require public companies to annually disclose the voluntarily, self-identified gender, race, ethnicity, and veteran status of their board directors, nominees for the board, and executive officers.
- Empower SEC’s Office of Minority and Women Inclusion (OMWI) to publish triennially best practices for compliance with these enhanced disclosure rules.
- Establish a Diversity Advisory Group at the SEC to study and issue recommendations on strategies that can be used to increase gender, racial, and ethnic diversity among board members.