House Financial Services Committee Holds Hearing on Board Diversity Bills as Illinois Pulls Back on Mandate

June 21, 2019

House Financial Services Committee members expressed bipartisan support for bills aimed at increasing diversity on corporate boards and in the C-suite through increased disclosures and a mandatory “Rooney Rule” for federal reserve banks.

Members of Congress and witnesses discussed two bills:

  • The Improving Corporate Governance Through Diversity Act (H.R. 1018):  Introduced in February and endorsed by the U.S. Chamber of Commerce and the Council of Institutional Investors, this bill would require enhanced proxy statement disclosures of the gender, ethnic, and veteran status of board members and the board candidates up for a vote at a company's shareholder meeting.

  • The Ensuring Diverse Leadership Act (H.R. 281):  Introduced by Rep. Joyce Beatty (D-OH), Chair of the Subcommittee on Diversity and Inclusion, the bill would implement a “Rooney Rule” for Federal Reserve banks.  Specifically, the bill would require Federal Reserve banks, when interviewing for the position of bank president, to interview “at least one individual reflective of gender diversity and one individual reflective of racial or ethnic diversity.”

Democrats cite statistics showing slow growth in board diversity, C-suite representation:  Led by Chair Maxine Waters (D-CA), Democrats were emphatically supportive of each of the bills, citing the lagging growth in diversity on boards, especially among people of color.

“Pursuing diverse boards is the right thing to do as a matter of economic interest,” stated Republican Ranking Member Patrick McHenry (R-NC), citing research showing the positive economic benefits of diversity in the board room and the C-suite.

Bipartisan support sets path for House success:  Without opposition, the bills are likely to pass the House Financial Services Committee and the House as well.  In the Senate, Sen. Bob Menendez (D-NJ) has already introduced a version of the board diversity disclosure bill.  However, quick Senate action is unlikely, with Majority Leader McConnell (R-KY) focused primarily on must-pass legislation and nominations.

An Illinois board diversity mandate bill has been revised to require reporting and research before heading to the governor's desk.  The Illinois measure, which would have required all Illinois-based companies to have one woman, one African American, and one Latino on their boards, was amended to eliminate the mandated representation, while requiring companies to report board demographics to the Illinois Secretary of State.  More importantly, the bill would direct the University of Illinois to study the data and make recommendations on ways to expand diversity on company boards in the state and publish a rating on each company's efforts to increase their board's diversity.