Democrats to SEC: Get moving on diversity rules for boardrooms

Congressional Democrats are pressuring the Securities and Exchange Commission to move forward with rules that would require corporate boards to detail their diversity. 

In a letter sent to the regulator Wednesday, key Democrats argued the SEC has been slow-walking the proposal.

{mosads}“While we applaud your decision to have SEC staff review [the issue], we are disappointed with the amount of time the SEC is taking to examine and seek public comment on this important and widely supported proposal,” the lawmakers wrote to SEC Commissioner Mary Jo White. 

The letter was signed by Sen. Sherrod Brown (D-Ohio) and Rep. Maxine Waters (D-Calif.), the top Democrats on the Banking committees in the House and Senate, as well as a host of other senior Democrats.

Also signing on to the letter were Reps. Marcia Fudge (D-Ohio), a former head of the Congressional Black Caucus, and Carolyn Maloney (D-N.Y.), who represents a Manhattan district home to many financial firms.

Their gripe centers on a proposal that would require corporate boards to publicly disclose the racial and gender composition of board nominees. Arguing that minorities and women are significantly underrepresented in corporate boardrooms, the lawmakers want the SEC to force corporations to document the racial mix of the panels.

The members pointed to a January study from the Government Accountability Office. The watchdog found that women hold just 16 percent of the seats in corporate boardrooms, despite making up roughly half of the work force. That study had been requested by Maloney in 2014.

In March 2015, a group of public pension fund administrators petitioned the SEC to review corporate board diversity practices and write rules requiring public documentation. 

The SEC agreed to review the matter, and now lawmakers are saying one year is enough time for the regulator to take action.

The watchdog previously drafted diversity rules in 2009 that required publicly traded companies to disclose more information about how a company’s director is selected and what role diversity plays in it.

But the lawmakers argued Wednesday that the initiative didn’t go far enough. They said the end result was inadequate disclosures, made worse by the fact that the rule didn’t actually define diversity, leading companies to provide information across a range of ethnic, gender and socioeconomic factors.

Instead, lawmakers want to see the SEC require companies to produce a simple chart indicating how diverse the applicant pools for their boards were, and how diverse the actual boards are. 

“We strongly urge the Commission to avoid any further delay on seeking public comment on this straightforward proposal,” they wrote.

For her part, White has said that board diversity is “enormously important.” At an event in January, the SEC chief said concerns about insufficient diversity are “well-founded,” and said she had directed her staff to study the issue, and whether more rules are needed.

Other Democrats who signed the letter were Sens. Robert Menendez (N.J.), Jeff Merkley (Ore.) and Cory Booker (N.J.), as well as Reps. Marcy Kaptur (Ohio), Tim Ryan (Ohio) and Joyce Beatty (Ohio).

Updated at 1:49 p.m and 2:49 p.m.

Tags Jeff Merkley Joyce Beatty Marcia Fudge Robert Menendez Sherrod Brown U.S. Securities and Exchange Commission

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