The Lowdown: Federal Push For Required Diversity on Corporate Boards
Diversity and inclusion. Odds are that you’ve heard the news: studies show that organizations that include different viewpoints and backgrounds in decision making processes are more successful. Despite this data, many organizations are still dominated by one type of person or viewpoint. Change can be difficult to advance – however it may no longer be optional.
The U.S. House of Representatives recently passed the “Improving Corporate Governance Through Diversity Act of 2019.” This law seeks to amend the Securities and Exchange Act of 1934 and will require that publicly traded corporations regularly disclose the breakdown of their boards of directors, officers, and related nominees. Introduced by Congressman Gregory Meeks of New York, the bill also establishes a Diversity Advisory Group section of the Securities Exchange Commission, focusing on increasing ethnic, gender, and racial diversity in the corporate-leadership sphere.
A similar bill is currently pending in the senate. Given largely bipartisan support for the initiative, it is likely that at some point in the future, corporate boards will face additional requirements relating to reporting – and ultimately – diversity and inclusion. I recommend that organizations explore possible approaches now rather than waiting for numerous requirements from the government. Research shows that there is a likely benefit from both a legal and developmental standpoint.
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