Former Securities and Exchange Commission heads on Wednesday suggested how the regulator can encourage companies to improve diversity at the board level and throughout their business.
Mary Schapiro, who was the SEC chair from 2009 to 2012, said a company needs a diverse board of directors to navigate thorny topics from racial justice to LGBTQ rights, abortion access and climate change. She spoke about the regulator’s Office of Minority and Women Inclusion at an event hosted by Howard University School of Law.
“These are such complex, multi-layered kinds of issues with really profound consequences for society and therefore for businesses, and I just can’t imagine a CEO successfully navigating them uninformed by the perspectives of a diverse board of directors,” Schapiro, who served under former President Barack Obama, told the event.
The SEC has approved a Nasdaq plan for listed companies to have greater board diversity and the agency is mulling its own potential board diversity rules for a broader range of companies. The regulator is also considering human capital disclosure rules that could require companies to report additional workforce data on topics including diversity.
Financial services firms should tie diversity goals to executive compensation, Schapiro said. “Once you tie their compensation to it, they’ll do it. It shouldn’t be necessary, but that’s reality I think.”
Mary Jo White, an Obama appointee who led the SEC from 2013 to 2017, offered another way to nudge companies to improve diversity: having the SEC personally meet with heads of companies to try and get them to make such disclosures.
“I would go and rattle a few cages,” she said. “I would also identify, if I could, leaders of some of those registrants who actually are disclosing, doing a good job, or would if you nudged them, and have them help you go out with your outreach to the others.”
When asked if there has been enough progress on diversity in the financial services industry, White said: “Not enough.”
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