The SEC, Corporate Governance, Disclosure and Social Policy: Diversity in the Board Room

But of course we know the SEC does indulge in attempting to move forward social policy via its disclosure rules—as it has with conflict minerals—and so it’s not surprising that the agency would pursue another socially charged issue.  In the end, Chair White in 2013 might only have been questioning the efforts of partisans to use the SEC to achieve social goals, as opposed to the appropriateness of the SEC’s pursuing social goals itself.

Chair White knows the new rule on diversity disclosure may come with some backlash: “Some may oppose even minimally more prescriptive diversity disclosure requirements,” but remains firm in her stance that “the SEC has a responsibility to ensure that our disclosure rules are serving their intended purpose of meaningfully informing investors. This rule [the current rule] does not and it should be changed.”

What Diversity Disclosure Could Mean for Public Companies

While I’m an advocate for board diversity for many reasons, adding more detailed disclosures to public company filings is where I part from Chair White’s stance on the SEC’s role in the social issue of diversity.

Make no mistake: Disclosure is not free.

Proper disclosures require time, effort, focus and money—and it’s not meaningful disclosure if it’s overwhelming disclosure. Take a look at any well-prepared proxy statement today: they already read like Russian novels.

We can be sure that the average investor is not reading any of it. Rather, people who are pursing specific special interests are reading the parts of company disclosures that are relevant to their various agendas.

It’s also not clear that shareholders would prefer corporations to spend time on this kind of social policy-related disclosure as opposed to running the company to increase profits on behalf of the shareholders.

Since it’s an election year—and Chair White is also expected to step down before the next U.S. president takes office, according to WSJ reports—it’s likely nothing will happen for some time.

What we do know, however, is that this move seems like another in a series in which the SEC is being dragged/is leaping into social policy work as opposed to sticking to its mission: to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation.

An earlier version of this article was first published in the D&O Notebook , a weekly blog that monitors, curates, and summarizes current issues—and occasionally creates thought leadership—in the areas of D&O liability, insurance, and corporate governance. The views expressed in this article are solely those of the author. This article should not be taken as insurance or legal advice for your particular situation.

For additional information, please contact Priya at phuskins@wsandco.com or (415)402-6527

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