House Financial Services Hearing to Focus on Corporate Board Diversity, Following Detailed Inquiries to Financial Services Companies

June 14, 2019

More than three months after the introduction of bills in the House and Senate which would require enhanced disclosures on the diversity of board members and candidates, the House Financial Services Committee will hold its first hearing on board diversity proposals on June 20.  The lag between the bills' introduction and the Committee's attention is likely attributable to the end of the Mueller investigation.

The hearing announcement by Committee Chair Maxine Waters (D-CA) comes days after letters were sent to nearly 40 major financial institutions requesting information on demographics and human capital to get a “complete picture of how large banks are meeting their commitments to diversity and inclusion.”

The hearing will likely focus on the Improving Corporate Governance Through Diversity Act (H.R. 1018/S. 360) which would require enhanced disclosure of the “gender, racial, ethnic, and veteran makeup” of “corporate C-suites and boardrooms."

Self-identification keystone of bill's disclosure component:  The bill requires the disclosure of a pre-defined set of self-identified diversity attributes—race, ethnicity, gender, and veteran status—for (a) board members; (b) board candidates disclosed in the proxy; and (c) Section 16 officers, reflecting individual privacy concerns.

Diversity policies also a focal point:  The disclosure will require companies to disclose whether the board, or any committee of the board, has adopted any policy, plan, or strategy to promote racial, ethnic, and gender diversity among the same pool of people.

Bill could move quickly:  With the Council of Institutional Investors and the U.S. Chamber of Commerce endorsing the bill, there is an increasing likelihood that the Improving Corporate Governance Through Diversity Act passes through the committee and maybe even the House.  The question will be what additional bills, like those Democrats have introduced which would mandate extensive human capital metrics disclosures, will also be pushed forward.