Is it good business for companies to add women to their boards? That is the question two professors—one from Pace University and another from USC—attempted to answer in The Conference Board’s latest Director Notes publication.
The report, entitled “The Effect of Gender Diversity on Board Decision-making: Interviews with Board Members and Stakeholders,” investigates the argument that women can add new and valuable perspectives to a process traditionally dominated by a relatively small circle of men. Its conclusions are primarily based on interviews with 24 French directors and stakeholders held after that country instituted a quota of 40 percent of either gender on public company boards by 2017. The report also cites other research in the area of gender diversity.
Among the findings in the report, the authors concluded that the real value of adding women to boards came not from their gender per se, but from the fact that they were more likely to be outsiders. They were also more likely to be foreigners, have expertise in more diverse business issues and functions than their male counterparts, and to have risen through the ranks outside the traditional elite networks. The authors conclude that bringing these different perspectives can substantively improve the collective decision-making of a board.
Conference Board members can download the report here. For more information on board diversity, read “Every Other One: A Status Update” from The Conference Board’s Committee on Economic Development.
By Judy McLevey, former Associate Director, The Conference Board Governance Center
Investors, the C-suite and boards have different views about what is, or should be, considered material information. A company’s financial results would be considered material by all parties. Based on SEC rules, companies are required to provide updates on their financial results on a quarterly and annual basis (10-Q and 10-K, respectively) and also timely disclose specified material developments that occur in between quarters (8-K and/or press release). Beyond pure financial information, other examples of material news would include merger & acquisition activity, changes in control and/or management changes, significant product announcements, dividends, etc.
The definition of materiality varies from company to company and industry to industry because it is a fact-based determination that is subject to interpretation. The Supreme Court, SEC, Financial Accounting Standards Board (FASB), international regulators, etc. have all offered their opinions/guidance on the definition of materiality. The SEC, in its Selective Disclosure and Insider Trading Rule, defined material information as something where “there is a substantial likelihood that a reasonable shareholder would consider it important” in making an investment decision. To fulfill the materiality requirement, there must be a substantial likelihood that a fact “would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.”
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While many Americans are focused on what a Trump administration will mean for such issues as healthcare, immigration, and gender diversity, those in the governance community are also concerned about the fate of the many Dodd-Frank Act rules enacted during the Obama administration and the possibility of mandatory use of universal proxy cards in contested director elections.
The latter governance issue has been monitored by The Conference Board Governance Center, which convened a roundtable on September 20, 2016. The Center has published roundtable highlights, which includes a primer on universal proxy written in Q&A format by Weil attorneys. Conference Board members can download the complimentary publication here. Read the rest of this entry »
By Gary Larkin, Research Associate, The Conference Board Governance Center
As corporate governance goes, the uncertainty of 2017 will be its own separate risk for boards and management of companies, big and small, public and private. I say that because of three things: the incoming Trump administration, the lack of a quorum on the SEC and the widespread use of cyber-terrorism.
Consider the following as we start the new year: hacking of US companies by foreign governments has increased exponentially and has now crossed over into disinformation campaigns (see 2016 US presidential election), several proposed Dodd-Frank Act rules related to executive compensation have not been finalized and there is a good chance the SEC will be down to two commissioners come the end of this month.
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