Speech by SEC Commissioner:
Remarks at the DirectWomen Board Institute
Commissioner Elisse B. Walter
U.S. Securities and Exchange Commission
New York, N.Y.
February 10, 2011
Thank you, Linda, for that lovely introduction. Having been a member of DirectWomen’s inaugural class, I want you to know that this organization holds a very special place in my heart. I am truly honored to be here tonight — surrounded by so many women (and men, too) who are dedicated to promoting corporate governance for U.S. companies. I’m particularly happy to be speaking here as you prepare to honor Roberta Karmel. Roberta was an SEC Commissioner when I arrived at the agency as a staff member. Her presence set an example for all of the female staff. Quietly, she knew each of us; she knew whether we were married or single, whether or not we had children. That made a difference I will never forget. And, I applaud you on your selection of the class of 2011 — the depth and breadth of experience of your newest members are quite impressive.
As a Commissioner of the Securities and Exchange Commission, my job is to protect the investors who vote the proxy card that, one day, may include your names as director nominees. I’d like to take the next few minutes to talk about the role of the SEC in corporate governance, some of the steps we’ve taken to improve investor participation in the governance of the companies they own, and then share with you a little bit of Commission history and my experience in advancement at the SEC.
Of course, the views I share with you tonight are my own, and do not necessarily reflect the views of the Commission, my fellow Commissioners, or members of the staff.1
As most of you already know, the composition of our Commission is a first in its history — women are in the majority. And, in my view, our President couldn’t have picked a better person than Mary Schapiro to lead this precedent-setting Commission.
Among Chairman Schapiro’s many accomplishments since she returned to the Commission in 2008, and indeed the list is now very, very long, are leading the Commission in a number of initiatives that relate to corporate governance.
While many have applauded the SEC’s initiatives on this front, there have been some who have criticized us for our work in this area.
I believe that our rules should support and not interfere with governance characteristics that market participants and Congress have identified as significant. Yet, I also believe that the SEC's proactive approach to addressing corporate governance issues — both disclosure and process — is sound policy for protecting investors. Investors should be able to participate productively in the governance of the companies they own, and it should not be hard to take advantage of this opportunity to participate.
Disclosure to Enhance Participation
Specific information about a company’s corporate governance, especially about directors and director nominee qualifications, is essential to an investor’s productive participation. Robust disclosure that complies with our disclosure rules that we amended in 2009 will help investors better understand how diversity is considered by the board when nominating director candidates (although the corporate track record for disclosure under this new requirement is quite spotty so far). My colleague, Luis Aguilar, has spoken extensively about this, and I commend him for his work to address the continuing lack of diversity on corporate boards.
I also believe that disclosure requirements present publicly-held companies with an opportunity — albeit mandated — to really explain their thought processes on choosing the right directors who fit in the total mix of the board. As you know, in 2009 we amended our disclosure rules to require that companies disclose — for each director and nominee — information about that particular director’s or nominee’s specific qualifications. With that insight, investors can better understand and evaluate whether a particular individual will add value to that company. This person-by-person approach is designed to inform the person-by-person voting decisions that shareholders make.
With women holding only 15.7% of board seats of Fortune 500 companies, according to the 2010 Catalyst Census,2 I think it is fair to say that there are significant challenges for those who want to see true gender diversity in corporate governance. While I will not offer up a personal analysis as to why women are underrepresented on corporate boards — I’ll leave that to the experts — I can tell you that my initial reaction to the statistics is disappointment.
The question is, how best to move forward? How will we change the culture and mindset that have created barriers to board diversity?
As Albert Hirschman noted in his book Exit, Voice, and Loyalty, “The voice option is the only way in which dissatisfied customers or members can react whenever the exit option is unavailable.”3 As I’ve said publicly before, the exit option, also known as the “Wall Street Walk,” is simply unacceptable to me. And, I can't imagine that many companies raising equity capital today or working hard to preserve the market value of their companies’ shares would actually recommend exit to their shareholders.
So that leaves voice as the best option forward.
Yet, the names that appear on the proxy card are only as diverse as the pool of candidates from which they are selected. And, without a truly robust selection process for candidates, I’m afraid that real changes in the composition of company boards may be quite difficult to realize.
Given recent litigation, I won’t comment on matters that relate to our rulemaking to facilitate shareholder director nominations. I will simply say that I continue to believe that shareholders should have a real say in determining who will oversee management of the companies they own. And, if shareholders have the right to place nominees on the company’s card, the characteristics of the nominee class will, in my view, change and expand.
As the only program specifically designed to identify, develop, and support accomplished women attorneys on their journey to the corporate director seats, DirectWomen is uniquely positioned to advance qualified women candidates to the proxy card.
Your application process is incredibly rigorous — in fact, I often compare it to what I had to go through with respect to my financial disclosures when I decided to accept a nomination to become a Commissioner. I encourage you to continue to spread the word about your process — including how much effort and care you take to select class members who can fulfill the current and emerging needs of corporate boards.
The resume rewriting process I went through with DirectWomen and Catalyst is an extremely helpful tool to hone in on the specific qualifications and experience that corporate boards are looking for. I am very pleased to tell you that it was my DirectWomen resume, not my older “lawyer” resume, that I submitted when I was being considered for nomination to serve as an SEC Commissioner.
The skills that class members learn from the Institute — the broadened access to the corporate board search community — and the advice concerning ways in which to build a broader professional network — all of these, in my opinion, are critical steps towards advancing women attorneys to corporate board positions.
But, we know that networking alone won’t guarantee a box on a proxy card or a seat on the board. As Catalyst noted in its recent research, mentoring alone isn’t sufficient to ensure advancement. You need sponsorship — someone to advocate on your behalf for advancement and leadership development opportunities.
Before I close my remarks and turn to your questions, I’d like to share a little bit of SEC history and my experience with advancement and sponsorship at the SEC.
When I began my legal career, first in the private sector as a litigator, and then a corporate and securities lawyer, female attorneys were very much in the minority. My colleagues, with no malice intended, referred to me as a “lawyerette.” When I left the private firm where I worked, I was three years out of law school and the most senior woman in the firm.
When I moved on to the public sector, I served at both the Securities and Exchange Commission and the Commodity Futures Trading Commission. At both places, I found that female attorneys were a much larger component of the workforce.
Of course, I probably should mention that back then, there were so-called “girls” divisions and “boys” divisions within the SEC. I was relieved to learn upon my return to the SEC as a Commissioner that this was no longer true.
I don’t want to suggest that the government is perfect in terms of diversity—that is very far from the case. But, I found the government environment welcoming. Both of my sons were born during my first tour of duty at the SEC; my colleagues were supportive in all respects.
To me, the most striking difference between the private and public sectors was the fact that at both the SEC and the CFTC, there were women who served in the most senior positions. More important, though, I found that the women who served in those senior positions, as well as the men, weren’t afraid to advocate for other women to advance into senior positions. And, the women in leadership positions were conscious that they set examples. They took affirmative steps to make it easier for those that followed. Remember that as you succeed in your quest for board seats.
Just a few months ago, Jane Diplock, the Chairman of the Securities Commission of New Zealand and the IOSCO Executive Committee, in her speech aptly titled “Putting Women on Board: Not the Right Thing to Do, but the Bright Thing to Do,” put it more bluntly.4 Quoting Madeline Albright, she said: “There’s a special place in hell for women who do not help other women.”5 As Chairman Diplock went on to remind us, if you do help others and go to heaven, “[p]erhaps by the time you do, you’ll find a female chairing the board.”6
I’d like to believe that our common mission of investor protection helped to bridge gender gaps at the Commission. Investors today are incredibly diverse — and the market is comprised of people that look and think much differently than ever before. Perhaps a more refined focus on today’s investors would also help the private sector as well.
The need for diversity in industry itself will remain integral to the effective functioning of our markets as they continue to change. That is why I want to commend DirectWomen for your foresight and hard work in putting this Institute together.
And, to you future corporate directors, I want you to know that this Commissioner is counting on you to always remember that shareholders are the owners of the companies you will oversee.
Once again, I am flattered to have been asked to speak tonight, and I’m so pleased to be with you. I am happy to answer any questions you have.
1 The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publications or statements by any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission, other Commissioners, or the staff.
2 Available at http://www.catalyst.org/publication/460/42/2010-catalyst-census-fortune-500-women-board-directors.
3 Hirschman, Albert O., Exit, Voice, and Loyalty (1970).
4 Jane Diplock AO, Chairman, Securities Commission New Zealand & Executive Committee, IOSCO, Speech at Women Corporate Directors, Paris, France, (October 13, 2010), available at http://www.sec-com.govt.nz/speeches/2010/131010.shtml.