You are here: Home Knowledge Base Society Implementing Board Diversity Proposals Disclosure rules about diversity in the composition of the workforce and senior management positions.
Symposium 2012

Proposal - Disclosure rules about diversity in the composition of the workforce and senior management positions.

The Challenge

In the wake of the global crisis, there is clear momentum towards changing the way that business is conducted—whether in the form of increased regulations, greater accountability or changing corpora ...

In the wake of the global crisis, there is clear momentum towards changing the way that business is conducted—whether in the form of increased regulations, greater accountability or changing corporate leadership. Such initiatives include changing the composition of corporate boards to include more women. What progress has been made on these initiatives and what would make them more effective?

Proposal for promoting diversity and transparency through rules enacted by capital market regulators requiring a company to disclose whether and how diversity is a factor in considering candidates for staff, senior management and boards.

 

International experience

For the first time, the SEC (U.S. Securities Exchange Commission) adopted a rule to assess a company’s commitment to developing and maintaining a board based on the diversity of its members (December 2009). Such rule demands that the company must disclose specifically three points: a) if diversity is a factor considered for nomination to the board of directors, b) how diversity is considered in this process and c) how the company assesses the effectiveness of its policy for considering diversity.

Early disclaims on files received by SEC in February 2010 indicated that some companies had done a good job in providing information about diversity in the workforce (including management and boards) and disclosing to investors about diversity policies that were created and implemented. Other companies, meanwhile, failed to disclose useful information to investors about the topic. The SEC has asked those companies to keep in mind that investors itself requested this disclosure and those disclaims should be prepared with an eye toward it being useful to those investors.

Another international example on rules of disclosure about diversity is New Zealand, which included a new paragraph to its 10.5.5 Normative in order to request companies to include additional and specific information on gender diversity in its Annual Reports.

 

Rationale

This type of initiative requires those who decide about new board’s nominations, at least, to consider the issue of diversity as important. And if they choose to disregard it, they will have to deal with the depreciation of their images to a market of investors who relies on studies that associate diversity to better decisions and better performance.

Moreover, the initiative seems to be effective, at least when looking from the american experience. That's because it has been demonstrated that the companies are making more efforts with their gender diversity policies since the ASX Corporate Governance Council announced the emend of the Principles and Recommendations to ask the companies to provide information on gender diversity on boards and senior executive positions. Between November 2009 and December 2010, an increase was noted in the nomination of women that rose to 57 women on the boards of 54 companies as opposed to only 11  nomination  during the previous year.

Another issue to be considered, already agreed among scholars of corporate governance all over the world, is that merit, qualifications, experience, personal qualities of the candidate, independence and diversity are the criteria to nominate  non executive board members.

 

A matter of  superior performance

Once the debate on gender diversity in senior management positions overcame the discourse of equity and social justice and also became a matter of superior performance (eventhough the causality between the improvement of performance of companies with women on their boards is questioned by some authors). Therefore, this solution  finds its grounds on protecting public investors and must be observed by companies holding management responsibility towards its investors.

 

A solution for the Brazilian case

The proposed solution is to Brazil to adopt a CVM rule in order to assess listed companies commitment to developing a diverse board, through creating the obligation on (i) informing investors about their criteria for nominating its members and (ii) taking the diversity issue into account for those nominations. The tools for such reporting could be the Reference Form or the Annual Report. In these, the company should disclaim its numbers of diversity, diversity policies and criteria of the company in the selection of professionals for the positions.

    Related Proposals

    Proposal
    Symposium 2012

    Orchestrating Impartiality

    Slow progress in the Corporate world of Women Directors participation and talent gender diversity inclusion, is still a matter of discussion all over the world and currently a controversial debate is ...

    Slow progress in the Corporate world of Women Directors participation and talent gender diversity inclusion, is still a matter of discussion all over the world and currently a controversial debate is taking place at the European Union.1 There have been several examples of different models of enforcement and adoption measures in Europe from 2003 to date, via binding laws, recommendations and non-binding voluntary progress models, with a clearer improvement and acceleration towards equality when a law of quotas is enforced, with sanctions and time deadlines. European Commission thought and hoped that a nonbinding commitment would work but the 2011 progress

    Polity, Business
    Proposal
    Symposium 2012

    Creation of voluntary actions to promote MNCT (mentoring, networking, coaching and training) to insert women in boardrooms

    Create incentives for agreements between institutions (public, private and non-profit organizations) in order to promote mentoring, networking, coaching and training (if and when needed) involving wom ...

    Create incentives for agreements between institutions (public, private and non-profit organizations) in order to promote mentoring, networking, coaching and training (if and when needed) involving women to provide all the necessary tools for their insertion on the boards. The inequality in the number of women comparing with the number of men on boards is partly a result of gender discrimination. Research has shown that the inclusion of only one woman on the board is able to break paradigms and potential prejudices, creating a potentially contagious effect to insert new women on boards of directors. Even if there is no gender

    Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Promoting changes in the dynamics of family child care through suitable periods of paternity leave.

    Enact a law in order to extend the period of paternity leave to encourage paternal involvement in the tasks of creating and raising children, especially in the period immediately after the birth of th ...

    Enact a law in order to extend the period of paternity leave to encourage paternal involvement in the tasks of creating and raising children, especially in the period immediately after the birth of the child. The notion that raising children is almost an exclusive responsibility of women prevails in most contemporary societies. In this perspective, it is difficult to find place for greater paternal participation and responsibility in baby care. This kind of thinking is reflected in the legislation establishing the periods of paternity leave in certain countries: according to the International Labor Organization (ILO), the shorter periods of paternity

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Implementation of a suitable infrastructure in large private companies where parents could leave their children during workday.

    Enact a legislation requiring large private companies to create a daycare infrastructure so that mothers do not have to give up their career to care for children. The cultural reality of most contempo ...

    Enact a legislation requiring large private companies to create a daycare infrastructure so that mothers do not have to give up their career to care for children. The cultural reality of most contemporary societies imposes the woman all the burden of care and upbringing of children from birth. Given this situation, it is necessary to develop measures to ensure that women could be able to reconcile the responsibilities of motherhood with professional tasks. One of these measures to effectively promote a balance between family life and professional career is the creation of an infrastructure within large companies to provide the

    Polity, Academia, Business
    Proposal
    Symposium 2012

    Implementation of affirmative action determining a minimum participation of both genders in the boards of State-Owned Enterprises (SOEs).

    The State should take affirmative action to promote gender diversity on the boards (eg. minimum 1/3 of each gender) of SOEs (companies controlled or owned entirely by Federation or State-members) in o ...

    The State should take affirmative action to promote gender diversity on the boards (eg. minimum 1/3 of each gender) of SOEs (companies controlled or owned entirely by Federation or State-members) in order to set an example and encourage the private sector to do the same. The solution constitutes an affirmative action which establishes that boards of SOEs must be formed by 1/3 of each gender. This solution must take place when, at the end of each term of a male director, the substitute must be a woman until the established minimum percentage is reached. To avoid cases of noncompliance, if

    Polity, Academia, Business
    Proposal
    Symposium 2012

    Equity stakes of Development Banks conditional on gender diversity.

    Multilateral Development Banks and State level Development Banks should bind their equity stakes to contractual clauses that ensure minimal gender diversity on the boards of their investee companies. ...

    Multilateral Development Banks and State level Development Banks should bind their equity stakes to contractual clauses that ensure minimal gender diversity on the boards of their investee companies. Multilateral Development Banks (e.g. IFC / World Bank) and State level Development Banks (e.g. BNDESPar / BNDES in Brazil) are relevant shareholders of thousands of companies worldwide. These investments are carried out directly or through private equity funds in both publicly-held and privately-held companies. As evidence of the importance of the equity interest of these agents, the IFC has allocated about $ 2 billion in shareholdings of 132 companies in 2011, while

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Loans from Development Banks with favorable terms for companies committed with greater gender diversity on their boards.

    Multilateral Development Banks and State level Development Banks should create programs that provide loans with advantageous terms to companies committed with greater gender diversity on their boards. ...

    Multilateral Development Banks and State level Development Banks should create programs that provide loans with advantageous terms to companies committed with greater gender diversity on their boards. Multilateral Development Banks (e.g. IFC / World Bank, IADB) and State level Development Banks (e.g. BNDES in Brazil) are relevant creditors of thousands of companies worldwide. As evidence of the importance of the role of these agents, the IFC has disbursed about $ 5 billion in loans to 182 companies in 2011, while in the same period the BNDES has disbursed about $ 140 billion ($ 70 billion), including hundreds of large loans

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Incentives for gender diversity by institutional investors funded by Governments in their role as shareholders.

    Institutional Investors financed by Governments (e.g. Sovereign Wealth Funds, Public Pension Funds or Pension Funds of State-Owned Enterprises, etc.) should create objective criteria in their investme ...

    Institutional Investors financed by Governments (e.g. Sovereign Wealth Funds, Public Pension Funds or Pension Funds of State-Owned Enterprises, etc.) should create objective criteria in their investment processes in order to positively differentiate companies committed with greater board gender diversity. Institutional Investors financed by Governments, particularly sovereign wealth funds and pension funds of state-owned enterprises are relevant shareholders of thousands of companies worldwide. It is estimated that, by the end of 2011, assets under management of sovereign wealth funds have reached $ 4.8 trillion, while the 300 largest pension funds had about $ 6 trillion under management. Given that the resources

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Including diversity as a principle to guide the process of appointment of executives on boards in the corporate law.

    Including in the corporate law a principle that guides the appointment of directors to the board based on the diversity, in order to improve the management and corporate governance of the companies. T ...

    Including in the corporate law a principle that guides the appointment of directors to the board based on the diversity, in order to improve the management and corporate governance of the companies. The inclusion of diversity in corporate law as element to be considered in the process of appointment of directors has a rational based on principles. First of all, reinsuring principles in written law strengthen their application. Ultimately, those principles serve the special task of guiding judges on their decision making on corporate conflicts. Therefore the importance of the solution lies also on forming leading cases on the subject.

    Polity, Academia, Business
    Proposal
    Symposium 2012

    Gender diversity on boards of directors as a requirement for celebrating public contracts.

    Legislation that will establish a minimum percentage of both genders in boards as a qualification requisite for participation in public tender.   Economic Rationale The relevance of the proposal esta ...

    Legislation that will establish a minimum percentage of both genders in boards as a qualification requisite for participation in public tender.   Economic Rationale The relevance of the proposal establishing minimum representation of both genders in boards as a requisite qualification for participation in public tender (procedure for public contracting or public biding) lies in the volume of resources involved in this type of contracting around the world. It is worth mentioning that the State must provide the country infrastructure such as the fundamental facilities and systems serving a city or area (transportation and communication systems, power plants, and schools)

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2012

    Engage CEOs and senior leaders by forming small peer groups of “Champions of Change” which commit to working together to increase the representation of women in leadership

    The challenge: Over the last few years, we have seen a growing recognition of the importance of including more women in decision-making roles and of the benefits gained by society and business in doin ...

    The challenge: Over the last few years, we have seen a growing recognition of the importance of including more women in decision-making roles and of the benefits gained by society and business in doing so.  In Australia, if you go back 5 years, we were starting from a low base, with less than 9% of board seats of our top companies held by women.  Smaller companies (beyond the top 200) were viewed as a virtual “women free zone.”  Worse than the modest starting place, there had been no progress in more than 5 years. It became clear to many of

    Business