Over the last several years, we’ve observed certain trends that are shaping corporate governance and which we believe will impact the board of the future. We structured our 2014 Annual Corporate Directors Survey to get directors’ views on these trends and other topics including:
Posts Tagged ‘Diversity’
The lack of gender parity in the governance of business corporations has ignited a heated global debate, leading policymakers to wrestle with difficult questions that lie at the intersection of market activity and social identity politics. In my new book, Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity (Cambridge University Press, forthcoming in 2015), I draw on semi-structured interviews with corporate board directors in Norway and documentary content analysis of corporate securities filings in the United States to investigate empirically two distinct regulatory models designed to address diversity in the boardroom—quotas and disclosure.
Corporate governance remains a hot topic worldwide this year, but for different reasons in different regions. In the United States, this year could be characterised as largely “business as usual”; rather than planning and implementing new post-financial crisis corporate governance reforms, companies have operated under those new (and now, not so new) reforms. We have witnessed the growing and changing influence of large institutional investors, and different attempts by companies to respond to those investors as well as to pressure by activist shareholders. We have also continued to monitor the results of say-on-pay votes and believe that shareholder litigation related to executive compensation continues to warrant particular attention.
I understand today’s participants include a number of trustees and asset managers for some of the country’s largest public and private pension funds. Without a doubt, pension funds play an important role in our capital markets and the global economy. This is due, in part, to the fast growth in pension fund assets, both in the public and private sectors.
For example, since 1993, total public pension fund assets have grown from about $1.3 trillion to over $4.3 trillion in 2011. Over that same period, total private pension fund assets more than doubled from roughly $2.3 trillion to over $6.3 trillion by 2011. As of December 2013, total pension assets have reached more than $18 trillion. This growth was fueled by many factors, including the rise in government support of retirement benefits, and the increased use by companies of pension plans as a way to supplement wages.
There has been no shortage of press coverage about the lack of employment diversity in the financial services sector. Now, both the US Congress and the European Union have taken action in an attempt to remedy historical practices. The increased focus on the adequacy of an institution’s diversity and inclusion initiatives warrants their reexamination in light of regulatory developments and evolving best practices.
Background—The Statutory Requirements of Section 342 of Dodd-Frank
Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Section 342”) was adopted to help correct racial and gender imbalances at financial institutions and their regulators by prescribing inclusion requirements at the specified US government agencies that regulate the financial services sector, entities that contract with the agencies and the private businesses they regulate. Congresswoman Maxine Waters of California, the author of Section 342, noted that “many industries lack the inclusion and participation” of minorities and women, with none “more egregiously … than the financial services sector.” Section 342 provides the opportunity to “not only give oversight to diversity, but to help the Agencies understand how to do outreach [and] how to appeal to different communities.”
In our recent ECGI working paper, Are Female Top Managers Really Paid Less?, we focus on the gender wage gap of executive directors in the UK. In particular, we ask the question whether female top managers are paid less than their male counterparts, whether the gender wage gap is higher in male dominated industries (such as financial services etc.), and what effects female non-executive directors and remuneration consultants exert on pay.
This third annual edition of Governance Insights presents Davies’ analysis of the corporate governance practices of Canadian public companies over the course of 2013 and the trends and issues that influenced and shaped them.
We expect 2014 to be an active year for governance themes with greater calls for diversity on boards, a growing shareholder voice on “say on pay” resolutions, and further regulatory initiatives around proxy voting and the regulation of proxy advisory firms. We also anticipate continued discussion on shareholder activism and scrutiny of the tools and strategies used by issuers and shareholders.
As we begin 2014, calendar-year companies are immersed in preparing for what promises to be another busy proxy season. We continue to see shareholder proposals on many of the same subjects addressed during last proxy season, as discussed in our post recapping shareholder proposal developments in 2013. To help public companies and their boards of directors prepare for the coming year’s annual meeting and plan ahead for other corporate governance developments in 2014, we discuss below several key topics to consider.
Significantly expanding on the data in the Fenwick Corporate Governance Survey (discussed on the Forum here), Fenwick has published the first survey to analyze gender diversity on boards and executive management teams of companies in the technology and life science companies included in the Silicon Valley 150 Index (SV 150) compared to the very large public companies included in the Standard & Poor’s 100 Index (S&P 100).  The Fenwick Gender Diversity Survey analyzes eighteen years of public filings regarding boards and management teams—beginning with the 1996 proxy season and ending with the 2013 proxy season—to better understand changes in the leadership of some of our most important companies, and the gradual gender diversity improvements taking place. The 70-page report includes detailed analysis of:
Gender quotas for corporate boards of directors have attracted attention in Europe, where a number of countries have enacted mandatory or voluntary quotas. In the United States, some activists, scholars, and policy makers have advocated quotas as a way to shatter the glass ceiling for women in business and (possibly) to improve corporate decisionmaking.
The appeal of quotas is that they represent the kind of structural change that could alter business practices that exclude women from leadership roles. Social psychology has demonstrated that gender discrimination flourishes when institutions allow actors to give free reign to stereotypes and to unconscious biases. Effective anti-discrimination measures must inform actors about these biases and limit the effects of bias on hiring, promotion, and the distribution of rewards in the workplace and in society. Still, quotas may have a dark side: critics worry that quotas could damage women’s career prospects if new directors are seen as tokens. Critics also predict that quotas could harm corporate performance, if new female directors are untrained or inexperienced. Empirical claims on both sides await further study by scholars.