Bill Overview
Title: Improving Corporate Governance Through Diversity Act of 2021
Description: This bill requires certain issuers of securities to disclose the racial, ethnic, and gender composition of their boards of directors and executive officers, as well as the status of any of those directors and officers as a veteran. It also requires the disclosure of any plan to promote racial, ethnic, and gender diversity among these groups. The Securities and Exchange Commission must establish a Diversity Advisory Group to report on strategies to increase gender, racial, and ethnic diversity among board members.
Sponsors: Rep. Meeks, Gregory W. [D-NY-5]
Target Audience
Population: People involved in global corporate governance and corporate leadership
Estimated Size: 6000000
- The act focuses on issuers of securities, which includes publicly traded companies. This directly affects those in corporate governance, including boards of directors and executive officers.
- By emphasizing diversity in racial, ethnic, gender, and veteran backgrounds, the act may impact minority groups who seek representation in corporate governance.
- The data disclosed can potentially affect all shareholders of these companies, as it provides insight into the diversity policies and may influence investment decisions.
- Policies encouraging diversity can have broad societal impacts, potentially influencing corporate culture and promoting inclusive business practices that extend to workplace environments globally.
Reasoning
- The given policy is primarily aimed at improving diversity in corporate governance by requiring disclosure of demographic data of executive levels, so it would primarily impact those directly working in such environments—typically from middle to upper management.
- This policy can also indirectly affect broader societal perceptions of diversity and inclusion within the workforce, potentially benefiting diverse applicants and employees seeking guidance or advocacy from such companies.
- Corporate governance improvements typically have a delayed effect on general workforce wellbeing but can have immediate impacts on issues like investment retorts and employee morale due to perceived transparency and inclusivity.
- As the policy is focused on large corporations, the immediate impacts on day-to-day American workers might be limited, however, there would still be a symbolic benefit regarding representation over time.
- Given the policy budget and target, implementation will not directly change the financial conditions of individual employees or stakeholders but is expected to systemically influence corporate culture and potentially lead to more inclusive workplaces.
Simulated Interviews
Board Member (New York)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- I believe this policy is a step in the right direction for corporate transparency and accountability.
- There could be more direct guidance on HOW to achieve diversity, not just disclosing what currently exists.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 8 | 6 |
Finance Executive (California)
Age: 38 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 8.0 years
Commonness: 10/20
Statement of Opinion:
- This policy is critical for the tech industry which has been lagging behind in diversity.
- It provides a good benchmark and raises awareness even if not directly affecting company operations immediately.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
HR Specialist (Texas)
Age: 29 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- This act aligns with the shift we are seeing in how corporations address diversity.
- Although it's positive, real change takes consistent effort beyond policy requirements.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 7 | 5 |
Shareholder (Illinois)
Age: 50 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 18/20
Statement of Opinion:
- Disclosure of such data is important, but returns are what I mainly care about. It's good for company image maybe.
- I want to see if these policies actually benefit the bottom line.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Social Activist (Colorado)
Age: 27 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 8/20
Statement of Opinion:
- I'm hoping this is a stepping stone towards broader inclusion policies, including veterans like myself.
- It's about time these conversations happen at higher levels and trickle down to all ranks.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Retired Executive (Georgia)
Age: 62 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- Representation on boards is essential and I have lived the change through my career.
- These measures are timely, though followup on actual exec diversification is necessary.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 8 | 8 |
Diversity Consultant (Massachusetts)
Age: 33 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 14/20
Statement of Opinion:
- We need this kind of legislation to drive corporate accountability and actual change.
- Implementing this gives more leverage in board negotiations for diversity.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 7 |
Legal Advisor (Washington)
Age: 41 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 17/20
Statement of Opinion:
- It's a necessary shift but far from solving all diversity-related issues on its own.
- Legal frameworks must go hand in hand with cultural shifts for maximum impact.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
CEO (Florida)
Age: 49 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 7.0 years
Commonness: 9/20
Statement of Opinion:
- Although added compliance can be cumbersome, transparency builds trust with stakeholders.
- I expect greater gender diversity to bring fresh ideas and innovation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
Software Engineer (Ohio)
Age: 36 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 4.0 years
Commonness: 13/20
Statement of Opinion:
- I think less red tape and more creative freedom foster diversity, but transparency helps, so it's a balancing act.
- The Tech industry needs both regulations and flexibility.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Cost Estimates
Year 1: $5000000 (Low: $4000000, High: $6000000)
Year 2: $5000000 (Low: $4000000, High: $6000000)
Year 3: $5000000 (Low: $4000000, High: $6000000)
Year 5: $5000000 (Low: $4000000, High: $6000000)
Year 10: $6000000 (Low: $5000000, High: $7000000)
Year 100: $10000000 (Low: $8000000, High: $12000000)
Key Considerations
- The regulation primarily impacts listed companies, therefore influencing public market dynamics.
- Administrative costs for compliance may vary across companies, depending on their current governance practices concerning diversity.
- Potential long-term economic and societal benefits due to enhanced diversity require monitoring, which could alter future estimates.