November 22, 2019
A new bill requiring enhanced proxy statement disclosures of diversity information regarding a company’s board members, board nominees, and executive officers was introduced and approved within the same week by the House of Representatives in a 281 to 135 vote, with 55 Republicans voting to support the measure.
Over the summer, the House Financial Services Committee debated and ultimately passed two board diversity bills—one from Rep. Gregory Meeks (D-NY) and the other from Rep. Carolyn Maloney (D-NY). Both bills were approved by the committee with strong bipartisan support, although some Republicans called for the duplicative bills to be combined before sending them to the House floor.
The new “Improving Corporate Governance Through Diversity Act of 2019” sailed through the House. Introduced on November 14, the bill (H.R. 5084), which essentially consolidates the two duplicative bills above, followed an accelerated vote path from introduction to adoption by the full House in five days. The fact that the House Financial Services Committee passed the similar Meeks and Maloney bills likely fast-tracked the action.
Diversity, veteran status disclosures for board members, nominees, and executive officers would be required. Borrowing from Mr. Meeks' first bill, H.R. 5084 would require the SEC to implement proxy statement disclosures mandating companies provide data on the gender, racial, ethnic, and veteran status of board members, board nominees (i.e., those included in the proxy), and executive officers. The disclosures would be made based on voluntarily self-identified information. Companies would also be required to disclose whether they have “adopted any policy, plan, or strategy to promote racial, ethnic, and gender diversity” among those corporate leaders.
Despite uncertain Senate prospects, issue to remain front and center: The bill now moves to the Senate Banking Committee, where a companion bill introduced by Sen. Bob Menendez (D-NJ) already exists. The Senate docket, controlled by the GOP, remains incredibly tight, and therefore despite significant bipartisan support in the House, the bill may not move at all. Even so, attention to the diversity of boards remains a hot topic for companies, investors, and legislatures.