Corporate Governance

The SEC and Diversity in the Boardroom: Global Concern and Board Diversity (Part 3)

By J Robert Brown Jr.

We are discussing diversity in the boardroom and the speech given by Commissioner Aguilar on Sept. 16 at the SAIS Center for Transatlantic Relations (at Johns Hopkins), titled "Diversity in the Boardroom is Important and, Unfortunately, Still Rare." 

Commissioner Aguilar's speech touched on the growing global reaction to the problem of board diversity.   The problem of board diversity is a global one.  How does the US compare?  As we noted in an earlier post:

• With respect to the number of companies with at least one woman on the board, the percentage in the US is 68.93%.  In other words, 31% of the 1754 companies followed by GovernanceMetrics have no women on the board.  That's high enough, however, to be ranked 14th.
• The higher ranked top countries?  Finland (96.3%); Sweden (93.88%); Israel (93.75%); Norway (91.30%); South Africa (90.70%); Philippines (83.33%); Thailand (81.82%); Denmark (80.77%); Ireland (75.00%); Canada (72.79%); Spain (71.74%); Egypt (71.43%); France (68.93%). 

A number of countries have taken steps to address the concern.  Some are modest; some are profound.  In the more modest department, some of our common law brethren have encouraged diversity.  As Commissioner Aguilar described: 

• For example, in Australia, companies are now required to disclose the company's progress related to board-established gender objectives as well as disclose the number of female employees in the entire organization, in senior management, and on the board. In the United Kingdom, companies are now required to "pay due regard to the benefits of diversity on the board, including gender" when searching for and appointing directors.?

In the more radical approach there are countries such as Norway.  The Nordic Nation has legally mandated that public companies include at least 40% representation of each gender on the board.  So far the country has done so with no apparently economic catastrophe.  Moreover, others, including France, are likely to follow suit.

Until recently, it looked like the United States was an outlier in taking steps to encourage board diversity.  The SEC, however, recently put in place disclosure requirements that, while not in league with Norway, certainly set an important tone about the significance of board diversity. 

Full post as published by The Race to the Bottom on September 22, 2010 (boomark / email).