WASHINGTON, D.C. – U.S. Senator Bob Menendez (D-N.J.), the highest ranking Latino in Congress, today introduced legislation that would require public companies to disclose information related to the racial, gender, ethnic makeup and veteran status of corporate boards and senior management. The Improving Corporate Governance Through Diversity Act of 2021 addresses shortcomings in the U.S. Securities and Exchange Commission’s (SEC) diversity disclosure rule. Congressman Gregory Meeks (N.Y.-05) is introducing companion legislation in the House.
“For too long corporate America has fallen short in racial, ethnic and gender diversity. Without greater diversity in top corporate positions, the U.S. will fail to compete with other leading economies and stall our nation’s progress towards full inclusivity,” said Sen. Menendez, a senior member of the Senate Banking and Housing Committee. “This bill will ensure transparency in corporate America, while highlighting the need for further accountability for public companies. It’s time corporate boardrooms mirror the rich diversity of our country.”
“Last Congress, the House passed the Improving Corporate Governance Through Diversity Act. Now, I urge my colleagues in the Senate to review and pass the companion bill Senator Menendez is reintroducing today,” said Rep. Meeks. “Diversity is proven to have a positive impact on business performance and we want to ensure an equitable and fair future for everyone. Disclosing the gender, racial, ethnic and veteran makeup of these corporate boardrooms will not only shed light on the value of diversity, but hopefully encourage corporate shareholders to increase diversity in the highest ranks of their corporations.”
In addition to requiring public companies to report demographic information, the bill would also require the Director of the Office of Minority and Women Inclusion to publish a best practices and compliance report to the SEC every three years. The bill would also establish a Diversity Advisory Group, which would study the status of corporate diversity and submit annual reports to Congress.
Sens. Sherrod Brown (D-Ohio), Elizabeth Warren (D-Mass.), Chris Van Hollen (D-Md.), Cory Booker (D-N.J.), Dianne Feinstein (D-Calif.), Alex Padilla (D-Calif.), Kirsten Gillibrand (D-N.Y.), Catherine Cortez Masto (D-Nev.) and Raphael Warnock (D-Ga.) are cosponsoring the bill.
“Corporate America has done little to increase diversity in their board rooms and among their management,” said Sen. Brown, Chairman of the Senate Banking and Housing Committee. “Companies must take diversity seriously and set the tone from the top. This bill will provide more transparency and lead to greater diversity to help create a more inclusive economy.”
“Our corporate boardrooms must reflect our nation’s diversity. To fully achieve inclusivity as a nation, we need transparency on the racial, ethnic, and gender make-up of boards and senior management for public companies,” said Sen. Van Hollen. “This legislation marks an important step forward to increase the diversity of corporate leadership and decision-makers so that we can take advantage of America’s full economic potential.”
“At every level of every organization and in every sector, we must do more to ensure that leadership is reflective of the rich diversity of our country,” said Sen. Booker. “This bill will create much needed transparency and accountability measures that will empower consumers and the public with information about who is making decisions at public companies and the extent to which those boardrooms and C-suites are representative of the diversity of the American people.”
“California’s culture of inclusivity and diversity has helped foster some of the most innovative companies in the world,” said Sen. Padilla. “Unfortunately, far too many talented, qualified Americans have been shut out from reaching corporate leadership in our largest companies. We need an honest and transparent look at the racial, ethnic, and gender diversity of public corporations to help build a more inclusive economy. Greater corporate diversity will unlock opportunity for our most underrepresented communities—making our whole economy stronger.”
“To this day, corporate America has failed to reflect our country’s growing diversity in its board rooms and executive suites,” said Sen. Cortez Masto. “I’ve long fought to ensure that underrepresented groups have a seat at the table, because when we embrace our country’s diversity, our economy and businesses are better off for it. I’ll continue working in Congress to increase transparency and promote diversity across all sectors.”
Sen. Menendez’s 2017 Corporate Diversity Survey found that although most Fortune 100 companies believe in the idea of increasing diversity among their senior leadership, few are making tangible progress on the matter.
The survey found that despite diversity and inclusion having made their way into the everyday lexicon of America’s top performing companies, many companies “talk the talk,” without “walking the walk.” The vast majority of companies do not set tangible targets to deliver on their self-professed commitment to diversity, with only 37.7% of the surveyed companies including numeric targets for diversity at the executive team levels and only 11.5% of companies setting specific targets for diverse recruitment among their Board of Directors.
“The U.S. Chamber has long supported the Improving Corporate Governance Through Diversity Act and we commend Senator Menendez for re-introducing this important legislation,” said Tom Quaadman, Executive Vice President, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce. “Diversity has become increasingly important for good corporate governance and the Improving Corporate Governance Through Diversity Act will establish a model to organically boost diversity on boards through disclosure, rather than the counterproductive quota-driven strategies that some have attempted. We look forward to working with the Senator on this important issue.”
The National Urban League, Nareit, Financial Services Forum, American Bankers Association, International Council of Shopping Centers, Bank Policy Institute, American Council of Life Insurers, NAIOP the Commercial Real Estate Development Association and Real Estate Roundtable also support the legislation.