Investor calls to require companies to disclose information about board members' personal characteristics might have unintended consequences, SEC Commissioner Hester M. Peirce said Tuesday at a Council of Institutional Investors conference.
In guidance issued last month, the SEC's division of corporate finance said that to the extent a board or nominating committee when making a decision considers an individual's self-identified diversity characteristics, such as race, gender, ethnicity, religion, nationality, disability, sexual orientation or cultural background, "we would expect that the company's discussion required by (the regulation) would include, but not necessarily be limited to, identifying those characteristics and how they were considered."
Ms. Peirce said she feared that the SEC staff's expectations, coupled with outside pressures to bring more diversity to corporate boards, would burden "board members and nominees to divulge, and agree to have divulged publicly — to the whole world — personal details that they might want to keep private or to a smaller subset of people."
She continued, "I hope that I'm wrong, but I worry that this pressure will be intense on people. A person who doesn't want to share his sexual orientation, religion or his ethnic background with the world may face pressure to allow the company to get credit for (having) a diverse board by divulging that personal detail."
Institutional investors pursuing environmental, social and governance goals should pay more attention to the "S" part of ESG, Oregon Treasurer Tobias Read told attendees. Social issues such as worker training, diversity and economic security are part of a fiduciary's responsibilities, Mr. Read said.
Investors looking to enhance long-term performance should pay closer attention to and get more involved in regulatory changes, including the upcoming SEC transaction fee pilot program, said Don Pontes, investment director for financial markets at the $354.8 billion California Public Employees' Retirement System, Sacramento, said at a session about market policy reforms.