A New Bill Seeks To Improve Gender Diversity on Corporate Boards

In March of this year, U.S. Rep. Carolyn Maloney of New York introduced the Gender Diversity in Corporate Leadership Act. The bill is intended to increase the number of women on corporate boards, and would require public corporations to report the gender composition of their boards and board nominees to the U.S. Securities and Exchange Commission (the “SEC”). It would also create an SEC advisory group to study and recommend ways to increase gender diversity on corporate boards.

In January, the Government Accountability Office (“GAO”) released a study showing that women held just 16% of seats in corporate boardrooms. This number was up from 8% in 1997. Based on these numbers, even if equal proportions of women and men joined boards each year beginning in 2015, it would take until 2065 for women’s representation on boards to be on par with that of men’s.

Proponents of the Bill argue that what gets measured, gets results. The theory is that, by turning the resources of Congress to the issue of board diversity, it is likely that public companies will devote more effort to diversifying their boards. Research shows that public companies with boards that are reflective of the diversity of the population of the United States have better decision-making processes and overall stronger organizational health. In other words, diverse boards are good for business and this translates into being good for the economy.

Those opposed to the Bill suggest that it is an unnecessary intrusion into the boardroom. Importantly, however, the Bill stops short of creating any mandatory quotas. Many European countries, on the other hand, have attempted to achieve boardroom diversity through quotas.

Germany recently became the latest country so far to pass a law that requires some of Europe’s biggest companies to give 30% of supervisory seats to women. In passing the law, Germany joined a trend in Europe to accomplish what has not happened organically, or through general pressure: to legislate a greater role for women in boardrooms.

Norway was the first country in Europe to legislate boardroom quotas, joined by Spain, France and Iceland, which all set their minimums at 40%. Italy has a quota of 1/3 and Belgium of 30%. Britain has not legislated quotas, but a voluntary effort, known as the 30% Club, has helped to substantially increase women’s representation. The group has used persuasion to help double the percentage of women on the boards of major British companies since 2010 – up to 23%.

The notion of government quotas for company boards has met substantial resistance in the United States. Representative Maloney’s Bill is one example of an advocate attempting to achieve boardroom diversity in another way. The Bill has been referred to the House Committee on Financial Services.

If you have questions or would like to speak to Attorney Sally P. McDonald, please call 401-824-5100 or email her at smcdonald@pldw.com.

Sally P. McDonald, Esq.

Attorney, Pannone Lopes Devereaux & West LLC

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