As a woman working at Domini Social Investments, it can be easy to disregard the pressing issue of gender diversity practices in the workplace. Domini was founded by a woman-Amy Domini-who continues to serve as Chair. Our CEO, CFO, and General Counsel are all women. More than half of the firm’s employees are women. When I attend meetings in the office, most often I am surrounded by more women than men. Although this reality is normal for me, it is especially rare for the financial industry. Recent trends suggest we are in the midst of change, but more assurance is necessary. This is especially true for diversity at the board level.
In 2009, the SEC approved rules for enhanced disclosure about risk, compensation and corporate governance in proxy statements and other corporate reports. Among these new requirements, the SEC required companies to disclose “the consideration of diversity in the process by which candidates for director are considered for nomination.” If a policy does exist, “how this policy is implemented, as well as how the nominating committee (or the board) assesses the effectiveness of its policy” is also required. While this was an important addition to disclosure requirements, the final ruling was a missed opportunity. Companies and shareholders alike are hurt by the fact that the SEC left it up to companies to define “diversity” for themselves. Not surprisingly, many companies define the term broadly, to include educational background, experience, viewpoint, etc.
In 2015, a number of large pension funds petitioned the SEC to require companies to provide investors with information on each nominee’s gender, race and ethnicity, in addition to the skills, experiences and attributes needed to fulfill the corporation’s mission. Early this year, Mary Jo White, Chair of the SEC, said she shared these concerns, and has directed her staff to look into it. This is a hopeful sign. Despite these remarks, last month, a number of lawmakers publicly criticized Chair White, for taking too long to propose new rules for diversity disclosure.
Increased diversity at the board level promotes effective corporate governance. The number of studies that support this conclusion continues to rise with each passing year. Companies with diverse leadership are more likely to avoid group-think and have the potential to better understand customer needs, anticipate new societal trends and emerging issues, and foster cooperation with their workforce and communities.
Since its inception, Domini has advocated for greater gender and racial diversity on corporate boards, and we have a long history of engaging with companies on the issue. However, in order to obtain useful and comparable diversity reporting from all companies, the implementation of explicit guidelines by the SEC is crucial. As boards increasingly become more diverse, we all stand to benefit.