Half of Russell 3000 and 43% of S&P 500 companies made no changes to the composition of their board of directors during the past year, according to a new report by the Conference Board which examined board practice trends, including the move to increase board diversity and representation. According to the report, the lack of board turnover in public companies is a primary reason why progress towards achieving gender diversity on boards has remained slow. Board tenure, the report continues, “continues to be quite extensive” with many industries seeing an average board tenure exceeding 10 years – thus spots are rarely turning over. Further, when spots do open, the report points out that “[the spot] is often taken by a seasoned director” rather than a newcomer.
The slow pace toward gender board parity has attracted significant attention in Congress as well as in several states, most notably California which has implemented a quota for female directors. At the federal level, the attention has prompted the introduction of bills in both the House and the Senate, the "Improving Corporate Governance Through Diversity Act of 2019," aimed at enhancing the information companies are required to disclose about the diversity characteristics of board members and board candidates. As is detailed in the Center “Quick Guide” linked below, the new legislation would require disclosure in the proxy statement of the racial, ethnic, gender, and veteran-status based on voluntary self-identification for (a) board members; (b) board candidates disclosed in the proxy; and (c) Section 16 officers. The new requirement represents a departure from current disclosures which focus on the disclosure of a company’s diversity policy.
Each bill is currently pending in the respective House and Senate Committees, and the Center will continue to monitor the legislation as it progresses.