Fresh from the presidential debate,** I find myself writing about board room diversity.*** Over the 2016 summer, SEC Chairwoman Mary Jo White signaled intent to revisit diversity in U.S. boardrooms. In 2009 the SEC adopted a diversity disclosure rule requiring companies to disclose how their nominating committees considered diversity and whether the company had a diversity policy. The full rule can be viewed here. The SEC did not define (nor did it mandate a singular definition of ) diversity, and companies have been left to define diversity individually, often without regard to gender, ethnic, racial or religious identities. The result, criticized by Chairwoman White, has been vague disclosures without apparent impact.
SEC diversity rule making (past and future) was the backdrop for a recent corporate governance seminar class where I asked students: Why should they care about board room diversity? And if the 2009 disclosure rule changes, how should it change? How do other countries approach the issue of boardroom diversity? Can it be a mandated or legislated endeavor? To guide our discussion we read Aaron A Dhir's brilliant and thorough: Challenging Boardroom Homogeneity: Corporate Law, Governance and Diversity and consulted Catalyst.org to understand the panoply of diversity choices from other jurisdictions.
Dhir's Challenging Boardroom Homogeneity was a helpful and powerful book, equipping students with facts and language to think about and discuss diversity. Dhir engaged in a qualitative, interview-based methodology to investigate, and ultimately compare the Norwegian quota system with the U.S. diversity disclosure experience. While noting the costs and the translation problems from Norway to the world writ-large, Dhir interpreted his results as follows:
"female directors, present in substantial numbers, may enhance the level of cognitive diversity and constructive conflict in the boardroom. They are more apt to critically analyze, test and challenge received wisdom. In doing so, they appear to have harnessed for their boards the value of dissent, a key driver of effective governance."
In focusing on the U.S. experience, however, Dhir found that U.S. firms defined diversity in terms of experience not identity, and that this initiative fell short of the goal of encouraging or promoting boardroom diversity. Dhir recommended that the SEC define diversity as containing socio-demographic components and encourage companies to incorporate such considerations in governance by imposing a comply or explain regime in the U.S. While some have lamented that the SEC's primary challenge is how to define what diversity means, Dhir, through his research and analysis has a pretty good staring point. Should someone send Chairwoman White a copy of this book?
More than even the careful methodology, the refreshing comparative perspective and thoughtful recommendations tied to data and observable trends, the book provides a common language to explain the phenomenon of why diversity, as an initiative, is even necessary in the first place. Chapter two engages with a nuanced set of issues, irrefutable fact and explanations of bias–implicit and explicit. Here I think, more so than even other parts of the book, students connected with the materials linking language to real experiences and observations in their own lives. The attack on the pool problem critique (there aren't enough qualified women and it variant: we hired the most qualified candidate from our pool) alone warrants my effusive praise for its persuasive presentation and ability to generate thoughtful student debate.
-Anne Tucker
**The debate wasn't the impetus, rather writing this post is just an exercise in settling my nerves before trying to sleep.
***I have previously written about gender-diversity issues (classroom and boardroom) on the blog here and here.