Corp Fin Issues Interpretive Guidance on Board Diversity Disclosures

February 14, 2019

The Securities and Exchange Commission’s Division of Corporation Finance (“Corp Fin”) has issued new interpretive guidance to clarify company disclosures on board diversity. Presented in a question-and-answer format, the new guidance adds an item to the Compliance and Disclosure Interpretations (“C&DIs”): Regulation S-K concerning Subpart 400 of Regulation S-K, which covers information separate from what companies must disclose in financial statements. Subpart 400 concerns details associated with corporate governance matters such as executive pay and board director qualifications. Question 116.11 of the C&DIs inquires what aspects regarding a board member with respect to diversity must be disclosed under Item 401. Question 133.13 poses the same question for a board nominee under Item 407.

This question appears as investors and several lawmakers seek additional disclosures about board members’ race, gender and ethnic backgrounds. Despite investors and lawmakers pushing for more diversity on boards, many public entities still lack women and minorities on their boards. Some companies have failed to provide enough information concerning their board members.

The question mentions that certain board members or nominees have willingly provided companies’ information such as their race, gender, religion, disability, or cultural background.

Corp Fin staff said companies should disclose how they consider the self-identified information of nominees under Item 407 and qualifications like diverse work experiences or demographic characteristics.