As we have discussed in previous articles, the Securities and Exchange Commission (SEC) currently requires limited disclosures on boardroom diversity. In short, companies can define diversity on directors and board nominees as they wish. Some even focus on geographic diversity (by noting how board members come from different States) which is obviously not what the regulator intended–and importantly not the information investors need to make decisions. As a result, many companies have been able to evade diversity efforts.
A bill sponsored by Representative Meeks intends to fill that gap by providing a Congressional definition of diversity for corporate board leadership. Unfortunately and quite surprisingly however, Meeks’ definition excludes both sexual orientation and gender identity–despite Out Leadership’s efforts in the past few weeks to secure an inclusive amendment. We believe, as do numerous Fortune 500 companies and CEOs, that an outdated and limited definition of Board diversity (gender, race and veteran status alone) is both bad for business, and a tremendous step back for the LGBTQ+ community.
For as long as board diversity policies have existed, LGBTQ+ have been excluded from them with a notable few exceptions such as Goldman Sachs. In fact, only 17 companies out of the Fortune 500 have LGBTQ+-inclusive board diversity policies–up from only 2 companies just five years ago. As a result, Out Leadership’s recently published board research Visibility Counts: The LGBTQ+ Board Leadership Opportunity also shows that only 0.2% of all Fortune 500 Corporate Boards seats – 25 seats out of 5670 – are occupied by an openly LGBTQ+ person. This is the tip of the iceberg on systematic exclusion from LGBTQ+ people in the boardroom.–and why legislation that purports to expand board diversity must include LGBTQ+ people.
Through Out Leadership’s #Quorum initiative, businesses are again leading the government on LGBTQ+ inclusion–now on the expansion of board diversity to be LGBTQ+ inclusive. CEOs know broader inclusion leads to better outcomes. This is the reason why the NASDAQ’s board diversity proposals to the SEC last December included LGBTQ+ leaders. It’s why California’s recently-enacted AB979 requiring diversity of under-represented communities on corporate boards includes LGBTQ+ people in its definition. And it’s why Goldman Sachs (who has had LGBTQ+ inclusive board diversity–and an out gay board member–since 1999) announced that it would no longer take a client public without an LGBTQ+ inclusive diverse board.
But it’s not just smart multinational companies who understand that LGBTQ+ inclusive diversity drives better outcomes–major asset managers, pension funds and endowments have also put their investment weight behind the idea. In fact, in partnership with Out Leadership over the last six years, New York State, New York City, CALPers and CALSters (the four largest pension funds in the United States) have all amended their investment guidelines that call for board diversity to include LGBTQ+ leaders. Their combined investment weight is over $2Trillion.
Diversity is and should be looked at through an expansively inclusive and intersectional lens–otherwise we risk tokenism. It’s why Out Leadership’s Quorum has for many years partnered with Black Corporate Directors, Women Corporate Directors, Latino Corporate Directors, ASCEND Pinnacle through our membership in the Diverse Directors Coalition. In our work, the DDCC has been very clear that it advocates for LGBTQ+ inclusive diversity.
So with so many boards, CEOs, pension funds, asset managers (not to mention 92% of the Fortune 500) including LGBTQ+ people in their definition of diversity, why would Congress consciously exclude LGBTQ+ leaders from its legislation? If this important oversight by HR 1277 was not accidental, it is a wake-up call for Board equality advocates to spell out the extent of the discrimination faced by LGBTQ+ people in the Boardroom and the remedies available. Indeed, many myths remain on collecting and sharing data on sexual orientation and gender identity of Board members. Every such myth we have proven wrong in our research, and welcome the opportunity to educate Congress.
The bill, HR 1277 (Improving Corporate Governance Through Diversity Act of 2021), was discussed in the House Committee on Financial Services chaired by Rep. Maxine Waters today. After five minutes of speeches, it was approved with virtually no amendment (despite Out Leadership’s best efforts) and is now heading to the House floor. You can see the replay here starting around the fourth hour.
Out Leadership will continue to advocate with our 81 global members, and 650+ CEO leadership cohort for this important bill to be amended to be LGBTQ+ inclusive. We hope you’ll join us.