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Disability Advocates Seek Inclusion in SEC Board Diversity Rules

Sept. 30, 2021, 10:00 AM

The SEC is warming up to calls to include people with disabilities in diversity reporting requirements for public company boards.

Allison Lee, the longest-tenured Democratic commissioner on the Securities and Exchange Commission, said there’s merit to counting individuals with disabilities as diverse members of boards, as women and ethnic minorities often are.

“It’s not an easy analysis. But it does seem to me potentially that disability is a group that makes a lot of sense to include,” Lee told Bloomberg Law in a recent interview.

The agency is looking to propose board diversity disclosure regulations for companies this fall, after approving a plan by Nasdaq Inc. to pressure companies listed on the exchange to make their boards diverse.

Disability advocates pushed the agency and Nasdaq to include people with disabilities in the exchange’s board diversity regulations earlier this year. They were unsuccessful, but their fortunes could change under broader SEC rules that would apply to a larger set of public companies.

Including people with disabilities in the SEC’s board diversity rules could open economic opportunities for them in ways that have never before been possible, said Jill Houghton, president and CEO of Disability:IN, a nonprofit advocating for greater inclusion of people with disabilities in business. The organization defines people with disabilities as those with physical, sensory, or neurological forms of disability.

“This could have the largest impact on people with disabilities’ ability to pursue economic opportunity than anything that has occurred over the history of time,” Houghton said.

Nasdaq Rule

Approved by the SEC in August, the Nasdaq rule asks companies traded on the exchange to have a certain number of female, racial or ethnic minority, or LGBTQ board directors. If companies have none, they must explain the reasons why.

Nasdaq declined to make disability a required disclosure metric. In comments to the SEC earlier this year, the exchange said that creating too many categories of diversity could lead to “inconsistent and noncomparable data across companies.”

A Nasdaq spokesman declined to comment for this story. However, Nasdaq’s website says companies can choose to disclose board director disability, veteran status, or other diversity characteristics on a voluntary basis.

Houghton said the SEC has a chance to address a “missed opportunity.”

“If we don’t include disability at the very top and from the get-go, then it’s never going to happen,” she said.

People with disabilities haven’t seen their representation within the workforce grow significantly since the passage of the Americans with Disabilities Act in 1990, she said.

In the U.S., only about 19% of people with a physical or other form of disability are employed, according to 2019 federal data.

A 2020 Accenture report found that companies that focused on disability engagement had nearly three times as many sales and about four times as much profit as their peers.

Investor Demand

Investors are taking note.

In 2020, New York State Comptroller Thomas DiNapoli added disability to the board diversity metrics on which the state evaluates companies as part of its proxy voting guidelines.

A group of 30 asset managers, including pension funds, state treasurers, and banks such as Bank of America Corp. and TD Bank NA, have told companies they invest in to encourage more people with disabilities in their workforces.

“We believe, and research has demonstrated, that embracing equality, diversity, and inclusiveness is increasingly critical to the long-term success of corporations in the global marketplace,” the group, which manages 2.8 trillion in assets, said in a December 2020 letter.

It remains unclear whether the SEC will include disability metrics in its forthcoming proposal.

The rule would “enhance registrant disclosures about the diversity of board members and nominees,” according to a description of the proposal on the agency’s agenda. SEC Chair Gary Gensler and other agency officials haven’t released further details.

The SEC almost certainly will face pushback over whatever it proposes, regardless of whether disability is a part of the plan. The Alliance for Fair Board Recruitment, an opponent of affirmative action, has sued the SEC over its approval of Nasdaq’s board diversity rules, which the group’s president said were “unfair and illegal.”

A representative for Gensler didn’t respond to a request for comment. The Alliance for Fair Board Recruitment said its focus is exclusively on race and ethnicity, and had no opinion on any disability requirements.

‘Natural Extension’

The first pushes for diversity in the boardroom centered on women’s inclusion and later expanded to include people of diverse ethnic or racial background, as well as members of the LGBTQ community.

“Now I think what you’re seeing is the natural extension of what it means to have a diverse board and to have diverse viewpoints,” said Elizabeth Bieber, counsel and head of shareholder engagement and activism at Freshfields Bruckhaus Deringer LLP.

“I think that’s going to be a big change,” she said.

From a practical perspective, it also means companies will have to think about how to ask existing or potential board directors to disclose background characteristics some view as sensitive, Bieber said.

“They’re going to have to think about how they find those folks in the market who are willing to disclose and willing to identify themselves in additional ways,” she said.

To contact the reporter on this story: Lydia Beyoud in Washington at; Andrew Ramonas in Washington at

To contact the editors responsible for this story: Michael Ferullo at; Laura D. Francis at