Nine US pension funds that collectively manage more than $1.1 tn in assets have petitioned the SEC to impose additional diversity reporting requirements in an effort to boost the number of women and ethnic minorities on the boards of public companies.
The funds, including CalSTRS, CalPERS and the New York State Common Retirement Fund, have proposed that the commission require disclosure in chart or matrix form of the ethnicity, race and gender of all nominees for seats on a company’s board, along with information such as skills, experience and attributes.
‘We believe better disclosure about the board’s skills, experience, gender, race and ethnic diversity can help us as investors determine whether the board has the appropriate mix to manage risk and avoid groupthink,’ the funds write in a letter to the SEC. ‘As large institutional investors, we have a real interest in electing a slate of board nominees who are well positioned to help carry out a company’s business strategy and meet our long-term investment needs.’
The group, which also includes the Illinois State Board of Investment, the Ohio Public Employees Retirement System, the North Carolina Retirement Systems, the Connecticut Retirement Plans and Trust Funds and the Washington State Investment Board, says investors often have a hard time determining race, gender and ethnicity under the current disclosure practice, particularly if no photos of the nominees are provided. It suggests nominees disclose these details about themselves.
The increased disclosure would bring US practice more in line with disclosure in some foreign jurisdictions, says the group. These include Canada, where publication of the number of women on Toronto Stock Exchange-listed company boards is required, along with targets for female board representation, and Europe, where the directive on disclosure of non-financial and diversity information requires companies to disclose diversity policies that may include age, gender, education and professional background.
