Results for: Nasdaq diversity
Tackling the underrepresentation of women of color on boards
With the passage of SB 826 in 2018, California became the first state to mandate board gender diversity (see this PubCo post). In 2020, the California Partners Project, which was founded by California’s current First Lady, released a progress report on women’s representation on boards of California public companies, tracking the changes in gender diversity on California boards since enactment of the law. That same year, AB 979 was signed into law in California. That bill was designed to do for “underrepresented communities” on boards of directors what SB 826 did for board gender diversity. (See this PubCo post.) The CPP has just released a new report that not only updates its 2020 progress report on board gender diversity, but also provides data on women of color on California’s public company boards. The takeaway is that, while there has been tremendous progress in increasing the number of women on boards, nevertheless, much work remains “to tap all of our talent and achieve racial and cultural equity. Most women on California’s corporate boards are white, while women of color—especially Latinas—remain severely underrepresented.” In addition to new data, the report offers some strategies for overcoming these deficits in diversity.
Gensler’s fireside chat
In a virtual “fireside chat”—is that an oxymoron?—hosted by NYU law, SEC Chair Gary Gensler was interviewed by former SEC Commissioner and current NYU professor Robert Jackson. Much of the discussion involved topics that Gensler has already addressed in the past, such as gamification and digital engagement practices (see e.g., this PubCo post and this PubCo post). Gensler was also quite reluctant to “get ahead of the rest of the SEC” on some issues and purposefully avoided discussion of actions by specific companies, such as Glass-Lewis’s recent announcement that it would offer equity plan advisory services—will that present a conflict?—and BlackRock’s recent decision to pass-through certain voting rights to institutional clients (see this PubCo post). However, he did offer some updates on various projects at the SEC.
Board refreshment: are evaluations preferable to retirement policies?
A new report from The Conference Board (together with ESG data analytics firm ESGAUGE) , Board Refreshment and Evaluations, indicates that, in pursuit of board diversity—in skills, professional experience, gender, race/ethnicity, demography or other background characteristic—companies must overcome one key impediment: relatively low board turnover. One approach is just to increase the size of the board; another is through “board refreshment.” To that end, the report observes, companies are relying less on director retirement policies based on tenure or age—which may sometimes be viewed as misguided and arbitrary—and looking instead to comprehensive board evaluations, sometimes conducted by a facilitator, as a way to achieve board refreshment. The Conference Board advocates that companies foster a “culture of board refreshment” that removes any stigma that could otherwise attach to an early departure from the board. In any event, The Conference Board cautions that “companies should expect continued investor scrutiny in this area. Indeed, while institutional investors may defer to the board on whether to adopt mandatory retirement policies, many are keeping a close eye on average board tenure and the balance of tenures among directors and will generally vote against directors who serve on too many boards.”
Nominee for SEC Chair Gensler on the not-too-hot seat
When Gary Gensler was rumored to be the nominee for SEC Chair, Reuters reported that, in light of his “reputation as a hard-nosed operator willing to stand up to powerful Wall Street interests”—notwithstanding his former life as an investment banker—the appointment was “likely to prompt concern” among some that he would promote “tougher regulation.” (See this PubCo post.) This week, Gensler faced his interrogators on the Senate Committee on Banking, Housing and Urban Affairs, but the questioning didn’t really generate much heat—unless you count Senator Pat Toomey’s observation that Gensler had a “history of pushing legal bounds.” There was, however, a mild skirmish over—of all things—the meaning of “materiality,” essentially a surrogate for the fundamental divide on the Committee about whether the securities laws should be used to elicit disclosure regarding social and environmental issues.
New report looks at board gender diversity in California
With the passage of SB 826 in 2018, California became the first state to mandate board gender diversity (see this PubCo post). The California Partners Project, which was founded by California’s current First Lady, has just released a new progress report on women’s representation on boards of California public companies, tracking the changes in gender diversity on California boards since enactment of the law. According to the report, “[r]esearch has shown us that companies with women on the board of directors outperform those without them. Women directors are more effective at managing risk, better able to balance long-term priorities, and have a keen sense of what customers, shareholders, and employees need to thrive.” The report observes that, if “all of the companies in the Russell 3000 followed California’s lead, over 3,500 women’s voices would be added to corporate governance.”
First legal challenge to California’s board gender diversity statute heads to trial
You might remember that the first legal challenge to California’s board gender diversity statute, Crest v. Alex Padilla, was a complaint filed in 2019 in California state court by three California taxpayers seeking to prevent implementation and enforcement of the law. Framed as a “taxpayer suit,” the litigation sought to enjoin Alex Padilla, the then-California Secretary of State (now U.S. Senator), from expending taxpayer funds and taxpayer-financed resources to enforce or implement the law, SB 826, alleging that the law’s mandate is an unconstitutional gender-based quota and violates the California constitution. The court in that case has just denied each side’s motion for summary judgment after concluding that there were triable issues of material fact. The case will now be going to trial, which was initially set for October 25. However, on the court’s own motion, the trial was “trailed” to December 1. Stay tuned.
Do behavioral biases impede board dynamics?
Although an audit firm might not be the first place you’d look for advice on board behavioral psychology, here’s an exception: a really interesting article from PwC about board dynamics and psychological biases that can impede boards from optimal performance and decision-making. The article identifies four common biases—authority bias, groupthink, status quo bias and confirmation bias—and provides clues for recognizing when your board might be afflicted with any of these problems, along with tips to address them. Well worth a read!
Hearing on board gender diversity statute—will the court issue a preliminary injunction?
On October 19, a federal district court judge held a hearing on a motion for a preliminary injunction in Meland v. Weber, a case challenging SB 826, California’s board gender diversity statute, on the basis that it is unconstitutional under the equal protection provisions of the 14th Amendment. The judge had previously dismissed the case on the basis of lack of standing, but was reversed by the 9th Circuit. What did the hearing reveal?
What’s ahead for this proxy season?
Alliance Advisors, a proxy solicitation and corporate advisory firm, has just posted its 2021 Proxy Season Preview, a useful introduction into the major themes of this season—well worth a read. First, and most obviously, there is COVID-19 and its direct and indirect impact. The pandemic is having a significant direct impact this year—not just in necessitating recourse to virtual-only annual meetings again this season—but also in focusing the attention of investors and proxy advisors on “how well corporate leaders navigated the crisis and protected business operations, liquidity and the health and welfare of employees.” But the pandemic has also had a somewhat surprising broader indirect impact. While it was widely anticipated that the challenges of COVID-19 would overwhelm any other concerns, the impact appears to be otherwise, as the pandemic has highlighted our increasingly precarious condition, including the effects of climate change, and intensified our social and economic inequality—all issues that are front and center this season. The Preview predicts that environmental and social proposals “are likely to see stronger levels of support in view of last year’s record 21 majority votes… and more assertive investor policies on diversity, climate change and political spending.”
What happened at the 2022 PLI Securities Regulation Institute?
At the PLI Securities Regulation Institute last week, the plethora of SEC rulemaking took some hits. It wasn’t simply the quantity of SEC rules and proposals, although that was certainly a factor. But the SEC has issued a lot of proposals in the past. Rather, it was the difficulty and complexity of implementation of these new rules and proposals that seemed to have created the concern that affected companies may just be overwhelmed. Former Corp Fin Director Meredith Cross, a co-chair of the program, pronounced the SEC’s climate proposal “outrageously” difficult, complicated and expensive for companies to implement, and those problems, the panel worried, would only be compounded by the adoption of expected new rules in the EU that would be applicable to many US companies and their EU subsidiaries. (See this Cooley Alert.) The panel feared that companies would be bombarded with a broad, complicated and often inconsistent series of climate/ESG disclosure mandates. Single materiality/double materiality anyone? But it wasn’t just the proposed climate disclosure that contributed to the concern. Recent rulemakings or proposals on stock buybacks, pay versus performance and clawbacks were also singled out as especially challenging for companies to put into effect.
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