SEC Commissioner Remarks on Diversity Policy Disclosure

By Final Rule that became effective on February 28, 2010, the SEC adopted amendments to Item 407(c) of Regulation S-K to require disclosure of whether, and if so how, a nominating committee considers diversity in identifying nominees for director.  In addition, if the nominating committee (or the board) has a policy with regard to the consideration of diversity in identifying director nominees, disclosure would be required of how this policy is implemented, as well as how the company assesses the effectiveness of its policy.

In a speech at the SAIS Center for Transatlantic Relations on September 16, Commissioner Luis A. Aguilar reported that some companies have done a good job with the new disclosure while others have a great deal of room for improvement.  Aguilar applauds disclosure that not only talks about the company's diversity policy and how it is implemented, but also gives investors actual facts that show the results of the company's efforts with a break down of board composition by race, sex and citizenship.  Though not identified in the speech, examples of Proxy Statements with such disclosure include the following:

Alcoa Inc. DEF14A filed on 3/2/10 (SEC file no. 001-03610)
Century Aluminum Co. DEF14A on 4/21/10 (file no. 001-34474)
Ingersoll-Rand plc DEF14A on 4/20/10 (file no. 001-34400)
Procter & Gamble Co. DEF14A on 8/27/10 (file no. 001-00434)



Some companies have provided only abstract disclosure, according to Aguilar, such as a statement that diversity was considered as part of an informal policy.  Aguilar has asked the staff to follow up with some of the companies that did not include any discussion of concrete steps taken to give real meaning to efforts to create a diverse board, and he expects disclosure to improve as a result. 

In describing how diversity is considered in identifying director nominees, Aguilar recommends that companies focus on specific steps taken to develop a diverse slate, possibly including a "policy of interviewing one or more candidates who are a minority and/or a woman, retaining a search firm that has been specifically instructed to seek (such candidates), or soliciting recommendations from organizations with a reputation for identifying candidates with a diverse background." 

Though not identified in the speech, comment letters filed by companies that respond to SEC Staff requests for expanded disclosure on diversity matters include the following:

DTE Energy Co. Form CORRESP dated 6/18/10 (available 8/27)
Biogen Idec Inc. Form CORRESP dated 7/2/10 (available 9/21)
Calgene Corp. Form CORRESP dated 6/4/10 (available 8/10)
Baxter International Form CORRESP dated 4/30/10 (available 7/13)