For years, the statistics have been glacial and disheartening. The percentage of women in the board rooms of the largest U.S. companies has crept up from 15 percent in 2005 to about 20 percent a full decade later.
To try and change that dynamic in Corporate America's halls of power, investors have pushed companies to disclose more about diversity and add more women and minorities. Advocates have created databases of qualified women to fill director seats. Organizations ranging from major financial firms to executive recruiting shops have run study after study that both highlight the bottom-line benefits of greater board diversity and draw attention to the low numbers.
And now, legislation is being drafted that would require companies to disclose gender diversity statistics and policies -- or explain why they have none. Rep. Carolyn Maloney (D-N.Y.) said last week she plans to propose the first-of-its-kind legislation this month, modeled on policies in Canada and Australia. An early draft of the legislation would require companies to share statistics on their boards' gender composition in their proxies, disclose their strategies in place to improve those numbers, and direct the SEC to recommend strategies for increasing gender diversity. Her proposal would also have companies explain why if they're not complying.
"Requiring an explanation is so important -- it forces them to think about it," Maloney said in an interview with The Washington Post. "We should be nudging them along and giving those who are working to enhance the presence of women on boards a gold star."
Maloney wrote a letter to Securities Exchange Commission Chair Mary Jo White encouraging her to adopt a similar proposal made last year by the leaders of nine large state pension funds, and announced a report she requested from the Government Accountability Office that examined the slow progress on U.S. corporate boards. It found that even if women were hired to boards at the same rate as men, it would still take until 2056 for women to reach parity on corporate boards.
"That’s staggering," Maloney said. "That shows no progress at all. I think it’s important that Mary Jo White has spoken out on it, and it's huge that investors want to know the numbers. If investors want to know this information, why not give it to them?"
The prospect of legislation on the issue was cheered by diversity advocates. "In general we’re thrilled, frankly, that she’s doing something," said Serena Fong, vice president of government affairs for the women's leadership nonprofit Catalyst, which consulted with Maloney's office on the legislation. "We need some conversation to get started on the topic that goes beyond 'here's the numbers, they're terrible, but we're not going to do anything about it.' "
Maloney's action is one of a small but growing number of signs that the issue could see more attention at the government level. White, speaking at an event in New York in November, said that "while quotas are not the path we follow in the United States, the target goal of a minimum of 40 percent on the boards of all Fortune 1000 and S&P 500 companies by 2025 set by the Women's Forum of New York is within reach and an imperative." Last September, Rep. Don Beyer (D-Va.) introduced a non-binding resolution that said corporations should commit to better gender diversity.
Several states have also drawn up similar non-binding resolutions to spur more women on boards. In 2013, the California Legislature passed a resolution urging more women on boards; it set minimums for different board sizes. The Massachusetts Legislature unanimously passed a similar resolution in October, and the Illinois General Assembly passed one in May. Cities are also getting in on the act, with both Philadelphia and New York taking action on the issue.
All these actions follow a rule by the SEC, which became effective in 2010, that asks boards to describe their diversity policies and how effective they are when nominating directors. But advocates say the rule packs little punch. It does not require companies to disclose statistics on diversity, and it's vague enough that many companies don't share much. Melissa Blechman, who leads the public policy working group of the 30% Club in the U.S., said that "the critical part here is the SEC does not define diversity, and companies can simply comply with the rule by saying they don’t have a diversity policy."
Maloney's proposal, while still in an early draft form, would require companies not only to share their policies and strategies on gender diversity, but to disclose a numerical statistic of their gender composition. It would also instruct the SEC to recommend strategies for increasing the number of women on corporate boards, and require companies to comply with those recommendations or explain why they aren't doing so.
While it may seem that gender diversity would be simple to calculate when looking at a board's list of members, investors say the process of doing so, particularly if they're also looking at racial or ethnic diversity, is time-consuming, expensive, and -- if bios or name are vague -- potentially inaccurate.
The numbers are also increasingly important as research grows on the financial benefit to companies that have more women at the top. "We could never have enough human resources to collect our own research on the composition of thousands of boards," said Denise Nappier, the state treasurer of Connecticut, who oversees the state's pension funds. She adds that "since the SEC adopted its disclosure rule, it has become abundantly clear that weak disclosure on board diversity inhibits shareholders' ability to make informed voting and investment decisions."
Catalyst's Fong says a disclosure policy has proven effective in countries like Australia. Representation of women on corporate boards there has jumped from 10.7 percent in 2010, when the Australian Securities Exchange published the guidelines, to 17.3 percent in 2015, according to Catalyst's figures.
Different countries have taken other approaches to jump-start the numbers, with some adding quotas that require companies to have a certain percentage of women on boards or face consequences. Others have set voluntary targets, such as the 25 percent aim set in Britain in 2011 as part of a government-backed report. Companies on the FTSE 100 exceeded that goal by 2015, reaching 26.1 percent, prompting the author of the report to bump up the target to 33 percent in October.
The draft of Maloney's legislation currently does not include a voluntary target, but she said she plans to consult with a range of stakeholders in coming weeks to get their views about whether it would be appropriate to include one. She does not support the idea of quotas.
Some note that a government-backed goal, voluntary or otherwise, could make business leaders wary. Kiersten Salander, chair of the U.S. 30% Club steering committee, said that while her organization is in favor of voluntary targets set by business leaders, it's hard to know whether stipulating a target at the federal level, even a discretionary one, would be successful. "The line between targets and quotas is blurry."
Others think legislation that calls for more well-defined disclosure or an explanation of numbers will be ambiguous and have little effect. Companies, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, "will simply come up with boiler plate that’s meaningless. Pressure from investors -- through their voting -- that's how it will change." Indeed, nearly 75 percent of the 26 investor proposals for greater diversity on boards tracked by the consulting firm EY in 2013 resulted in boards agreeing to include diversity as part of their selection criteria.
Elson also thinks "the odds of something like that getting through Congress in this environment are slim," he said. "You have a Congress that does not put regulatory mandates high on its agenda. That suggests it will not happen."
Even if it goes nowhere, says Connecticut's Nappier, proposing legislation for more women on boards could still have an upside. "It does raise awareness of the issue," she said. "She's going to raise that on the floor of the Congress. I don't know how they will ultimately dispose of her proposal, but public awareness and education helps build public pressure to do the right thing."