NYC Comptroller’s Office initiates Boardroom Accountability Project 3.0 promoting adoption of the “Rooney Rule”
And speaking of the NYC Comptroller’s Boardroom Accountability Project, as I just did in this PubCo post on the Project’s push for proxy access, on Friday, Stringer announced the the newest phase of the Project, Boardroom Accountability Project 3.0, an initiative designed to increase board and CEO diversity. The third phase of the initiative calls on companies to adopt a version of the “Rooney Rule,” a policy originally created by the National Football League to increase the number of minority candidates considered for head coaching and general manager positions. Under the policy requested by the Comptroller’s Office, companies would commit to including women and minority candidates in every pool from which nominees for open board seats and CEOs are selected. The announcement claims that the Project 3.0 represents “the first time a large institutional investor has called for this structural reform for both new board directors and CEOs.” Notably, the announcement also indicates that the Comptroller’s Office will “file shareholder proposals at companies with lack of apparent racial diversity at the highest levels.” The Comptroller’s Office characterizes the new initiative as the “cornerstone” of its Boardroom Accountability Project that “seeks to make meaningful, long-lasting, and structural change in the market practice so that women and people of color are welcomed in the door and considered for every open director seat as well as for the job of CEO.” Given Stringer’s success with his proxy access campaign, companies should pay close attention.
Corp Fin has posted a new Compliance & Disclosure Interpretation under Reg S-K that relates to diversity disclosure. The new interpretation applies to both Item 401— Directors, Executive Officers, Promoters and Control Persons and Item 407—Corporate Governance.
Is board stability always a good thing? A new study from consultant Spencer Stuart showed that, in 2018, 428 new directors were elected to boards of companies in the S&P 500, the most new directors since 2004, representing an increase of 8% from 2017. What’s more, 57% of boards added at least one new director, and 22% appointed more than one new director. However, overall turnover remained “modest.” While these new directors added “fresh skills, qualifications and perspectives”—and many were women, minorities and/or first-time directors—nevertheless, the study concludes, “progress is mixed.”
According to a new report from the EY Center for Board Matters, 54% of the 2017 class of directors of Fortune 100 companies served in non-CEO roles and 40% were female. More than half of the Fortune 100 added at least one independent director, slightly less than in 2016, but together, over the two-year period, over 80% of the Fortune 100 added at least one independent director. The result was that, taking director exits into account, “nearly all of the companies experienced some type of change in board composition during this period.” The EY Center’s associate director told the WSJ that the report showed “‘an increase in board diversity along the different dimensions of gender, age, ethnicity and in some cases socioeconomic background,’…. That means demand is growing for people who can offer ‘a more nuanced, multidimensional look’ at what is… happening with regard to consumer demographics, disruptive technology and workforce management, among other areas, she said. ‘The consensus is the best way to provide for boards to be able to see around corners, to ask the right critical questions, to get to the best answer possible, is to have a board that has the right mix of skills, expertise, background and perspective….There’s more openness to considering more and different perspectives.’”
BDO identifies questions companies may need to address at annual meetings of shareholders this season
Just in time to get ready for those annual meetings of shareholders, accounting firm BDO’s Center for Corporate Governance and Financial Reporting has developed a list of topics that companies should be prepared to address at their annual meetings of shareholders this season. The broad themes include the impact of efforts by the current administration regarding protectionism, taxes and deregulation, as well as corporate accountability and compliance.