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Aguilar on Diversity in the Board Room

In a September 16, 2010 address to the SAIS Center for Transatlantic Relations, SEC Commissioner Luis A. Aguilar discussed the persistent lack of diversity on corporate boards.  

It continues to amaze me that there remains a need to highlight the importance of diversity in the boardroom. While it's important to think of diversity in broad terms - such as variety of thought, geography, age, career experience, etc. - I speak of diversity as it is understood in the more traditional categories of gender and ethnicity. Although I agree that "board diversity" can be viewed in different ways, we must recognize that corporate boardrooms across the country lack diversity in terms of the ethnicity and gender of their members.

Aguilar stressed that study after study demonstrates that diversity on boards deliver value to shareholders.  

Many studies indicate that such diversity in the boardroom results in real value for both companies and shareholders. 5 In fact, a report commissioned by the California Public Employees' Retirement System (CalPERS) found that companies that have diverse boards perform better than boards without diversity.6 The report - Board Diversification Strategy: Realizing Competitive Advantage and Shareowner Value - stated that companies without ethnic minorities and women on their boards eventually may be at a competitive disadvantage and have an under-performing share value. The report also found that a selected group of companies with a high ratio of diverse board seats exceeded the average returns of the Dow Jones and NASDAQ indices over a five-year period.

Commissioner Aguilar also described some of the steps the SEC has taken to foster, if not mandate, diversity on boards of US companies.  

Last December, the Commission, for the first time, adopted a rule to assess a company's commitment to developing and maintaining a diverse board. Specifically, the rule will require a company to disclose in its proxy statement:

  • whether diversity is a factor in considering candidates for nomination to the board of directors,
  • how diversity is considered in that process, and
  • how the company assesses the effectiveness of its policy for considering diversity.

Aguilar also stated that making diversity a priority should not be a "do as I say, not as I do" issue.  Rather, government agencies like the SEC, and financial market participants derive great benefit from diversity, and should also make diversity a focus:

As we reach out to improve diversity on corporate boards, it is also important that government agencies and financial market participants better reflect our increasingly multicultural environment. I firmly believe that if government agencies and the private sector mirrored the diversity of the general population, issues such as diversity in the boardroom, and other important issues such as financial literacy in minority communities, would be a natural focus.

Commissioner Aguilar singled out his own agency for criticism, insofar as diversity is concerned.  

It is absolutely clear that the SEC needs to do a lot more to recruit, retain and advance minority candidates at the professional and senior levels. It is equally clear that an enormous opportunity to do this confronts the agency in the next year. As a result of new resources, the SEC is slated to hire 800 people - a tremendous influx of new talent for an agency of just 3,600 people.

Aguilar also noted that the Dodd-Frank Act requires the SEC to establish an office designed to help diversify the SEC.  

Commissioner Aguilar's speech can be read at: