SEC Chair White Advocates Corporate Boardroom Diversity (with Lofchie Comment)

SEC Chair Mary Jo White delivered remarks at the Johns Hopkins School of Advanced International Studies regarding the need to increase boardroom diversity. The SEC Chair drew on her personal experiences and on studies of corporate America. Specifically, Chair White discussed gender diversity in boardrooms, stating that gender and minority diversity brings "a richness and variety of experiences and perspectives that benefit companies and shareholders."

According to Chair White, gender diversity in boardrooms has not received sufficient attention. All too frequently, Chair White noted, female progress is still measured in "firsts"; and in American boardrooms and C-suites, progress toward equal gender representation has been slow.

Chair White asserted that having females in boardrooms leads to stronger boards with greater returns. She cited research that highlights the key strengths that women bring to boards, including increased cooperation, collaboration and consensus building. Furthermore, she noted, companies with three or more women board members outperformed companies with none by 60 percent – a "powerful correlation" that Chair White said should not be overlooked.

Ultimately, Chair White explained, shareholders and interested stakeholders need to make it known that this issue is important in order to address greater diversity in boardrooms. They must ask what steps are being taken to increase the diversity in boardrooms and C-suite positions.

Lofchie Comment: Chair White's statement that companies with women on their boards materially outperformed those that did not is noteworthy. She cites three studies (at footnotes 18-20). The study at footnote 20 gave the strongest economic support for women on the board, but the numbers it reported require further scrutiny. For example, it showed that companies with more women on their boards had materially higher returns on both sales ("ROS") and invested income ("ROIC"), but also had what it described as an "insignificantly" lower return on equity ("ROE"). Why would that be? Without a fuller explanation of that divergence, it's hard to be sure that the study compares apples to apples. The other two studies go into far more detail in their descriptions of companies that have greater or fewer numbers of women on their boards. In particular, the study by Credit Suisse, cited at footnote 18, is worth reviewing.

See: SEC Chair White's Speech.